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Industrial Development In Tennessee: 

Present Status and Suggested 


Paul Barnett 

Vol. 44 

Pu blished Bimonthly by the University of Tennessee 

Entered at the Post Office at Knoxville, 

ennessee, as Second-Class Matter, 

April 14, 1898, Under Act of 

j'ulv 16, 1894. 

he University of Tennessee 
July, 1941 

No. 4 




Industrial Development In Tennessee: 

Present Status and Suggested 


Paul Barnett 
Associate Professor of Statistics / 
University of Tennessee 



Charles P. White, Director 
Paul Barnett, Associate Director 

Issued by The University of Tennessee 

Division of University Extension 

Knoxville, Tennessee 

July, 1941 


Table of Contents 

Chapter Page 

I. Introduction 3 

II. Manufacturing in Tennessee, 1899-1939 7 

III. The Need for Increased Industrialization in Tennessee 37 

' \ 

IV. Industrial Development Programs in Competitive 

States 49 

V. The Present Program for Industrial Development in 

Tennessee 64 

VI. Limitations and Possibilities of an Industrial Develop- 
ment Program 83 

VII. Some Specific Suggestions for an Industrial Develop- 
ment Program in Tennessee 98 

VIII. Suggested Organization for Industrial Development 

in Tennessee 112 


It is the purpose of this study (1) to focus attention upon the 
need for a stronger integrated and more effective long-range state- 
wide program for industrial development in Tennessee, (2) to point 
out some of the broad fields of activity in which such a program 
could be effective in increasing the rate of industrial development in 
desirable directions in the state, and (3) to outline briefly the struc- 
ture and functions of a state-wide organization for formulating and 
carrying out a program of industrial development. 



The need for a more effective program than now exists to 
develop industries in Tennessee is strongly supported by certain 
definite conclusions from this study. 

1. Tennessee is below the average for the nation as a whole 
when value added by manufacture is placed on either a per 
capita or per area basis. 

2. Approximately 75 per cent of all manufacturing in Ten- 
nessee is concentrated in seven counties (Davidson, Shelby, 
Hamilton, Knox, Sullivan, Carter, and Blount) while 65 
of the 95 counties in the state have practically no manu- 

3. The more rapid rate of growth of manufacturing in Ten- 
nessee than in the United States and the South as a whole 
from 1923 to 1939 has been due almost entirely to the loca- 
tion and growth of five or six large plants (chemicals, tex- 
tiles and aluminum) which might have located in compet- 
ing states. 

4. The extremely low per capita income in Tennessee, which 
is only 50 to 55 per cent as large as the average for the 
United States, is due in part to the lack of industrial de- 
velopment. In states, like Tennessee, where a large pro- 
portion of the gainfully employed are engaged in the pro- 
duction of raw materials such as agricultural, mineral, and 
forest products, per capita income is low, whereas in states 
which transform raw materials into finished products, per 
capita income is high. 

5. Due to lack of industry to provide equal economic oppor- 
tunities a steady stream of workers is leaving Tennessee for 

states which offer higher incomes. This net movement of 
productive workers involves a fairly large transfer of wealth 
from Tennessee. Not only is Tennessee producing and 
shipping out raw materials to be processed in other areas 
but is also sending a large number of workers to do the 
6. The relative rate of industrial growth in Tennessee in the 
future is likely to be less rapid than in the recent past be- 
cause of the increased competition from those states which 
have set up aggressive coordinated programs for industrial 



An industrial development program should include the follow- 
ing broad fields of activity. 

a. Research and fact finding: 

In order to convince industrialists that Tennessee is the 
logical place to locate their plant a research and fact find- 
ing program is necessary to provide accurate and detailed 
information on material and labor resources, existing in- 
dustries, taxes, and industrial regulations. 

b. The statement of fundamental objectives and basic indus- 
trial policies: 

It is doubtful if any industrial development program can 
go very far without a clear statement of objectives and a 
clear formulation of policies calculated to achieve those 

c. An informational program aimed at improving the intangible 
locational factors: 

A sound industrial development program should provide 
for information aimed at raising the level of understand- 
ing of local industrial development problems, principles 
and techniques, and at developing and enlisting a high 
quality of local leadership. 

d. Advertising and promotional selling: 

An adequate program for industrial development requires 
( 1 ) the creation of some central agency to serve as a clear- 
ing house of information on industry, resources and in- 
dustrial possibilities, (2) a carefully planned and ade- 

quately financed advertising campaign, and (3) arrange- 
ments for contacting and selling prospective industrialists 
on a Tennessee location. 

The following organization is suggested for carrying out an in- 
dustrial development program embodying these four activities. 

a. An adequately financed Industrial Development Division in 
the Department of Conservation should be created. This 
Division should be definitely charged with the specific task 
of promoting industrial growth in the state. It should co- 
operate with the other agencies in the state in carrying out 
its work, and should receive advice and assistance from the 
Industrial Development Council and Technical Commis- 
sion named below. 

b. An Industrial Development Council of 12 to 15 business- 
men, civic leaders, and officials of cooperating agencies 
should be created. The Council should formulate general 
policies and pass judgments on the broad outlines of the in- 
dustrial development program and in addition should aid 
the Industrial Development Division in securing cooperation 
of the necessary agencies to carry out a coordinated program. 

c. A Technical Commission of 8 to 12 persons should be ap- 
pointed from those now working on various problems of in- 
dustrial development in the cooperating agencies. This 
Commission should assist the Industrial Development Divis- 
ion by giving advice on and help in the direction of the more 
technical parts of the state-wide program. 


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in 2013 


In view of the unutilized natural and human resources in 
the state for the development of industry and in view of the pro- 
grams for industrial development in operation in competing states, 
it is important that Tennessee face squarely the question of what 
can be done, within the limits of returnable costs, to speed up the 
rate of industrial development in the state. The disturbing fact 
is that there is no unified and co-ordinated long-range program for 
industrial development in Tennessee. Instead, there are several 
state and public agencies, private groups and individual concerns 
working more or less independently, and in some cases competi- 
tively, on different problems of commercial and industrial develop- 
ment. Under the present program, Tennessee is at a distinct dis- 
advantage in competition for new industries with those states which, 
having approximately equal industrial resources, have effectively 
co-ordinated and strongly financed industrial development programs. 

It is currently a matter of public concern that in the first few 
months of the nationa^ defense program Tennessee has not received 
defense contracts for existing plants or contracts for the construc- 
tion of new plants in proportion either to its population or to 
the amount of manufacturing in the state. This problem was 
clearly laid before a group of approximately 300 representatives 
of commerce and industry in Nashville, April 18, 1941, by Gover- 
nor Cooper, who received enthusiastic approval to open a per- 
manent office in Washington to obtain information about con- 
tracts to be let and to present relevant data on Tennessee plants 
and locations to the decision-making group. There are many 
factors which explain why Tennessee has not received its share of 
defense contracts, but it can hardly be doubted that the lack of 
a strong co-ordinated organization for the development of industry 
in the state is one of the important factors. The opening of a 
permanent contact office in Washington represents a distinct ad- 
vance. It is a step in the right direction, but it is not adequate. 
For every decision to expand production or build new productive 
capacity which is made in Washington and which the Tennessee 
office there could possibly influence, other decisions which involve a 
greater dollar volume will be made by private industry over the next 
few years. Careful consideration should be given to setting up an 
organization and working out a program so that those who make the 
decisions concerning the location of additional plant capacity con- 

structed by private industry shall have accurate and detailed infor- 
mation about available locations in Tennessee. 

The formulation of a sound industrial development program can 
be made only after careful analysis of the available industrial re- 
sources, the present industrial structure, the trends of growth, and a 
knowledge of the work of the several independent agencies now con- 
cerned with industrial development in Tennessee. In order to work 
out such a program it is necessary to have more accurate and de- 
tailed information than is now available in systematic form on 
resources, industries, and potentialities in the state. The program 
in Tennessee should be formulated only after a careful study of 
similar organizations in other states. 

Yet, despite the urgent need for accurate and detailed infor- 
mation, few facts are readily available about industrial development 
and industrial resources in Tennessee which are so essential for 
planning future development. Few persons within the state have 
any very accurate knowledge of what Tennessee can actually count 
in its list of industrial assets. Furthermore, there is little or no 
understanding of present objectives and certainly no clear cut agree- 
ment on industrial policies among interested persons and active 
agencies. Little is known about the scope and effectiveness of the 
work of the several agencies concerned with various aspects of in- 
dustrial development in the state. A Conference on Commercial 
and Industrial Development of Tennessee and the South held in 
Knoxville in October, 1939, under the sponsorship of the School of 
Business Administration of The University of Tennessee was at- 
tended by approximately 1 50 persons. It was the opinion of a num- 
ber of these persons that the first essential step in appraising the 
present program for industrial development in Tennessee and in 
formulating a new program should be a general over-all study of the 
problem of industrial development in the state as a whole. This 
same opinion was also expressed by a large number of the more than 
100 industrial and commercial leaders, research workers, editors and 
other public-spirited citizens who were interviewed by the author 
in April and May of 1940. It is in the hope of partially fulfilling 
that need that this reconnaissance or explanatory study is presented. 

This study is painted in broad strokes. Consequently, many 
interesting and important details are omitted, and in the opinion of 
some readers, perhaps, too many small parts of the picture are not 
painted. The purpose here is to present a panoramic view and 
broad suggestions rather than a comprehensive study complete in 

all details. The justification for this approach, aside from the utter 
impossibility of doing anything else at this stage of our knowledge, 
is that, in an attempt to think through the problem of what practical 
things can be done to increase the rate of industrial development in 
desirable directions in Tennessee, it appears essential to look first at 
the forest as a whole rather than at individual trees. As work on the 
problem of industrial development progresses, the individual trees 
must be studied very carefully. In fact, the formulation of a pro- 
gram which will involve the careful study of these individual trees 
is one of the main arguments of this study. But in an attempt to 
appraise the present program and to think through the complicated 
problem of industrial development, it seems more important to look 
as carefully as possible at the picture as a whole rather than to 
examine minutely one small spot or some narrow field in which some 
one person or agency happens to work. 

Consequently, the reader should understand that in this pre- 
liminary study it is not intended to offer definitive answers or final 
conclusions to the many perplexing but crucial questions involved in 
the formulation and successful execution of a program of industrial 
development in Tennessee. Much less ambitiously, this study simply 
aims to survey the field, to present a few of the basic facts, raise some 
of the more important issues, indicate a few of the problems on which 
additional study is essential, suggest some of the more important 
elements which should be included in an industrial development 
program, and suggest some types of organization for getting the job 
done which it is believed will be more effective than those which 
now exist. 

More concretely, this study involves a discussion of the follow- 
ing major topics in this order: 

1. The present size, rate of growth, industrial types, and 
geographical distribution of manufacturing in Tennessee 

2. Some of the factors which indicate the need for a larger 
amount of manufacturing in the state 

3. Brief analysis of the research and promotional activities 
in competitive states aimed at industrial development 

4. An outline of the present work of the several organizations 
in Tennessee actively concerned with various aspects of 
industrial research and promotion and a statement of what 
some of the principal gaps in the present program are 

5. A statement of some of the limitations of the effectiveness of 
a program for industrial development together with an out- 


line of some of the broad fields in which a unified state 
program might prove effective 

6. A list of some of the more important elements or parts which 
might be included in a state-wide program of industrial 

7. Suggested forms of organization for the execution af a state 
program of industrial development in the direction of com- 
mon objectives and in accordance with state policy. 

It is obviously not possible in a study of this length, nor is it 
possible at this stage of knowledge of the various subjects, to treat 
each of these topics exhaustively. This preliminary over-all study 
of some of the broad problems and fundamental issues is presented 
in the hope that by focusing attention upon some of the more con- 
spicuous gaps in the present unintegrated program and by pointing 
out the need for more effective effort, action may be accelerated 
toward the formulation and execution of a state-wide industrial de- 
velopment program for Tennessee. 



As a basis for clear thinking about any program for industrial 
development for Tennessee as a whole, it is necessary to have the 
essential facts about the present amount, recent growth, composition, 
and geographical distribution of industry in the state. It is the pur- 
pose of this chapter to present very briefly the essential information 
about the development of manufacturing in Tennessee and to 
point out some of the more significant conclusions which are im- 
portant in the consideration of an industrial development program 
for the state. This discussion is organized under the following main 

1. The amount of manufacturing in Tennessee as compared 
with other states in 1939. 

2. The rate of growth of manufacturing in Tennessee as com- 
pared with the rate of growth of manufacturing in the 
United States, 10 leading industrial states, and 13 southern 
states from 1899 to 1939. 

3. The size and relative importance of the leading industries 
and industrial groups in Tennessee in 1937, the latest year 
for which the data are available. 

4. The geographical distribution of manufacturing in Ten- 
nessee in 1939. 

5. Conclusions which have implications for an industrial de- 
velopment program. 


In 1939, according to the Biennial Census of Manufacturers, 
2,289 manufacturing establishments in Tennessee, each producing 

biennial Census of Manufacturers, 1937. Certain terms here used re- 
quire definition. 

a. Establishment: The term "establishment" has been used rather consis- 
tently by the Census Bureau to mean a single plant or factory. In 
their language: "As a rule, the term 'establishment' signifies a single 
plant or factory. In some cases, however, it refers to two or more 
plants operated under common ownership and located in the same 
city, or in the same county but in different municipalities or unincorpor- 
ated places having fewer than 10,000 inhabitants. On the other hand, 
separate reports are occasionally obtained for different lines of manufactur- 
ing carried on in the plant, in which even a single plant is counted as 
two or more establishments." Certain classes of establishments are ex- 
cluded. "Beginning with the census of 1904, the following classes of 
establishments have been excluded: 

goods valued at $5,000 or more per year, employed an average of 
131,874 wage earners; paid $109,662,000 in wages; purchased ma- 
terials, fuel, and energy which cost $407,746,000; and turned out 
products valued at $728,088,000. Deducting the cost of materials, 
fuel, and purchased energy from the value of product in 1939 shows 
a value added by manufacture of $320,342,000. This figure is a 

(1) Establishments which were idle throughout the year or reported 
products valued at less than $5000. 

(2) Establishments engaged principally in the performance of work for 
individual customers, such as tailor shops, dress-making and millin- 
ery shops, and repair shops. (This does not apply to large establish- 
ments manufacturing to fill special orders.) 

(3) Establishments in the building industries, other than those manu- 
facturing building materials for the general trade. 

(4) Establishments in the so-called neighborhood industries and hand 
trades, in which little power or no "machinery is used, such as 
carpentry, blacksmithing, tinsmithing, etc. 

(5) Cotton ginneries. 

(6) Small grain mills (gristmills) engaged exclusively in custom grind- 

(7) Wholesale and retail stores which incidentally manufacture on a 
small scale, particularly where it is impossible to obtain separate 
data for the manufacturing and for the mercantile operations. 

(8) Educational, eleemosynary, and penal institutions engaged in manu- 
facturing. (Data for the production of binder twine in penal in- 
stitutions and of brooms in institutions for the blind are, however, 
collected.)" Biennial Census of Manufactures, 1933, pp. 5-6. 

b. Value added by manufacture is defined by the Bureau of the Census as 
"the increment in value, as measured by the price of goods produced and 
materials processed. This measures the net addition to the value of com- 
modities, and is almost free from the duplication that is a factor in the 
total value of products. It is calculated, in the cases of all industries, 
by subtracting the cost of materials, supplies, containers, fuel, purchased 
electric energy, and contract work from the value of products." Bien- 
nial Census of Manufactures, 1937, p. 11. 

c. Value of products: "The amounts under this heading are the selling 
values at the factory or plant, of all commodities produced (or for some 
industries, receipts for work done) during census year, whether sold, 
transferred to other plants, or in stock, and consequently, under nor- 
mal conditions, the total value of products covers the cost of production 
(including overhead expenses) and profits. It also covers selling ex- 
penses except in cases where separate sales departments are operated, in 
which cases the values at which the products are turned over to the 
sales departments are reported." Ibid., p. 8. 

d. Wage earners: "Wage earners are defined as all time and piece work- 
ers employed in the plant (including power plant and maintenance, 
shipping, warehousing, and other departments). Working foremen and 
gang straw bosses are treated as wage earners, but foremen whose duties 
are primarily supervisory are classed as supervisory employees." In gen- 
eral the figure reported in the Census of Manufactures is an average 
obtained by dividing by 12 the total of the 12 monthly reports of wage 
earners on the payrolls for "the week that ended nearest the 15th day 
of each month, if that was a normal week, or for some normal week in 
the month." Ibid., p. 6. 






















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better measure of total manufacturing activity in the state than any 
of the other figures. 

In the same year, 16 states reported more wage earners in manu- 
facturing than did Tennessee; 16 states reported higher value added 
by manufacture; and 17 states produced manufactured products of 
greater total value. Most of these states were north of the Ohio 
River and east of the Mississippi River. 1 

As shown by Chart 1, on the basis of value added by manufac- 
ture, only three southern states ranked ahead of Tennessee; as shown 
by Chart 2, only three states ranked ahead on the basis of the 
average number of wage earners in manufacturing. In 1939, North 
Carolina reported 104.8 per cent more wage earners in manufactur- 
ing than Tennessee, Georgia reported 19.8 per cent more, and Vir- 
ginia reported 1.5 per cent more. North Carolina reported 703 per 
cent more value added by manufacture than Tennessee, Texas 
reported 41.9 per cent more, and Virginia 18.5 per cent more. The 
other southern states reported less. Since land area and population 
differ from state to state, total state figures on manufacturing throw 
little light on the relative density of manufacturing in the several 
states. Comparison between states should be made, therefore, on the 
basis of the number of wage earners in manufacturing per 1,000 
population or value added by manufacture per square mile. If the 
measure of density of manufacturing be value added by manufacture 
per square mile, as Table 1 shows, 18 states ranked ahead of Tennes- 
see in 1939, only two more than when area differences are disregard- 
ed. It will be observed that nine of these 18 states reported more 
than five times as much value added by manufacture per square mile 
as Tennessee. However, in 1939, only two southern states, namely, 
North Carolina and Virginia, produced more value added by manu- 
facture per square mile than Tennessee. The rank of the 13 south- 
ern states on the basis of value added by manufacture per square 

*On the basis of value added by manufacture, the states which had 
more manufacturing than Tennessee in 1939, in order of size, were: (1) 
New York, (2) Pennsylvania, (3) Illinois, (4) Ohio, (5) Michigan, (6) 
New Jersey, (7) Massachusetts, (8) California, (9) Indiana, (10) Con- 
necticut, (11) Wisconsin, (12) Missouri, (13) North Carolina, (14) 
Texas, (15) Maryland, and (16) Virginia. On the basis of value of prod- 
uct only three southern states ranked ahead of Tennessee, namely, Texas, 
North Carolina, and Virginia. Value of manufactured product, however, 
is a less accurate comparative measure of manufacturing in different states 
than the number of wage earners and value added by manufacture because 
of the movement across state borders of raw materials and semi-finished 
goods and because of the duplication involved in including the value of 
product turned out by one plant as raw materials in a higher stage of 




Value added 

per square 







Rank State 





per 1000 


of dollars) 



Rhode Island 

.... 223.1 



Rhode Island 

.... 149.0 



New Jersey _ 





.... 136.6 




.... 148.1 



New Hampsh 

ire 113.5 



Connecticut _. 

__ 143.6 




.. 106.5 



New York __ 

..... 70.3 



New Jersey - 

.... 104.2 




.... 55.6 




.... 99.5 




..... 52.2 




.... 89.3 








_ 86.7 




..... 39.3 




.... 86.6 




___ 31.2 




.... 81.0 








.... 77.8 







Delaware 76.5 

North Carolina 75.6 



Wisconsin — 

..... 12.4 



New Hampsh 

ire 11.6 




.... 75.5 



North Carolina 11.2 



New York .... 

.... 71.1 




..... 9.4 



South Carolina.. 66.8 



West Virginia 

i .. 8.9 




.... 64.0 




..... 8.6 




.... 60.6 




..... 7.7 




--_ 58.4 



Washington .. 

.... 52.2 



Georgia . 





.._ 50.0 




.... 47.2 




.._ 45.2 


Source: Value added by manufacture and number of wage earners from 
Biennial Census of Manufactures, 1939. 
Population from estimates by Bureau of the Census. 

mile is shown in Chart 3. On a per area basis, Texas drops to 
tenth place and Tennessee moves into third place behind North 
Carolina and Virginia. In 1939, on the basis of the number of wage 
earners in manufacturing per 1,000 population, 23 states ranked 
ahead of Tennessee. In five of these states one or more persons out 
of every ten was engaged in manufacturing, but in Tennessee only 
one person out of every 22 was so employed. Thus when the pop- 
ulation factor is introduced, Tennessee drops in comparison with all 
the states, but gains relative to the southern states. 

Despite the fact that measured by the average number of wage 
earners, value added by manufacture, or value of product, less than 
one-half of the 48 states ranked above Tennessee in manufacturing 
in 1939, Tennessee has less manufacturing activity than the average 


















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of the United States as a whole on a per area or a per capita basis. 
With 139 per cent of the land area of the United States, Tennessee, 
in 1939, acounted for only 130 per cent of the value added by manu- 
facture in the nation; likewise, with 2.21 per cent of the estimated 
population of the United States in 1939 Tennessee reported only 1.67 
per cent of the wage earners in manufacturing. Looked at from an- 
other angle, the number of wage earners in manufacturing per 1,000 
estimated population in 1939 was 45.2 in Tennessee as against 59.9 
for the nation as a whole. 1 In the same year value added by manu- 
facture per square mile of area amounted to $7,685 in Tennessee 
as compared with an average of $8,310 for the United States. 
Thus on the basis of the number of wage earners in manufactur- 
ing per 1,000 population, manufacturing in Tennessee was only 
75.5 per cent as important as in the United States; and, on the basis 
of value added by manufacture per unit of area, manufacturing in 
Tennessee was only 92.5 per cent as highly developed as the average 
for the nation as a whole. 



Turning from the amount and density of manufacturing in 
Tennessee and the state's rank relative to other states, let us investi- 
gate the question of the relative growth of manufacturing in Tennes- 
see from 1899 to 1939. How much has manufacturing in Tennessee 
increased during the 40 years from 1899 to 1939? How does the 
rate of growth of manufacturing in Tennessee compare with the 
rate of growth of manufacturing in the United States? Has the 
growth of manufacturing in Tennessee kept pace with or exceeded 
the industrial expansion of the South as a whole? How does the 
rate of growth of manufacturing in Tennessee compare with the 
rate of growth in the 47 other states, the ten leading industrial 
states, and the 12 other southern states? These are the questions 
which now claim our attention. 

No measure of the physical volume of manufacturing in 
Tennessee is available from 1899 to 1939. While the Bureau of 

*A more accurate measure would have been the per cent of the total 
gainfully employed engaged in manufacturing. The 1940 census data on 
employment were not available at the time of writing and the 1930 figures 
are too far out of date. That smaller number of employable workers per 1,000 
population in Tennessee than for the nation as a whole would naturally make 
the number of wage earners in manufacturing per 1,000 population in Ten- 
nessee lower than in the nation as a whole. The discrepancy due to this fact, 
however, would be small compared with the difference shown above. 



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the Census has reported six statistical series on manufacturing for 
each state by five-year periods from 1899 to 1919 and by two-year 
periods from 1919 to 1939, not one of these six series is an accurate 
measure of the growth of manufacturing. These six series are 
presented in Table II. 

Three of the most useful measures of the growth of manufactur- 
ing are average number of wage earners, value of products, and value 
added by manufacture. But, in addition to the errors introduced 
by an increase in the minimum size of manufacturing establish- 
ments canvassed in 1921 and subsequent periods, all three of the 
series are further defective as measures of the growth of manufactur- 
ing. Because of technological changes and the increasing mechani- 
zation of industry, the number of wage earners in manufacturing 
has increased more slowly than the volume of manufacturing. The 
two value series, value of product and value added by manufacture, 
are seriously impaired as measures of the growth of manufacturing 
from 1899 to 1939 because of large upward and downward changes 
in the general level of wages and commodity prices. This defect 
is partially corrected by expressing the two value series in terms 
of a dollar of constant purchasing power, that is, by dividing each 
series by the United States Bureau of Labor Statistics index of 
wholesale prices, which uses the figures for 1926 as a base year. 
Value added by manufacture and value of products thus corrected 
for price changes from 1899 to 1939 are shown in columns 6 and 8 
in Table II. The growth of manufacturing in Tennessee from 
1899 to 1939, as measured by value of product and value added by 
manufacture corrected for price change, is shown by the two curves 
on Chart 4. 

Measured by the number of wage earners in manufacturing 
and the value figures, corrected as far as possible for price changes, 
the percentages of change in manufacturing in Tennessee for the 
over-all period from 1899 to 1939 and four shorter periods are as 

Per Cent of Increase or Decrease 



















Wage earners 






Value added by manufacture 






Value of product 






Because of the upward movement of prices from 1899 to 1914 
and the tremendous increase in prices in the World War I from 
1914 to 1919, the actual dollar figures reported by the Census of 


















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Manufactures, uncorrected for price changes, would, of course, give 
much higher percentages of increase from 1899 to 1939. In this 
period, based on the reported dollar values uncorrected for price 
changes, wages paid increased 645 per cent, value of product increas- 
ed 685 per cent, and value added by manufacture increased 739 per 
cent. While these percentages are higher than the ones above com- 
puted from the data corrected for prices changes, the corrected figures 
are much better rough measures of the growth of manufacturing in 
Tennessee than the percentages computed from the uncorrected data. 
These three measures of manufacturing indicate different rates of 
growth, but the most dependable of the three series— value added by 
maufacture— shows that manufacturing in Tennessee increased, 
roughly, 500 per cent from 1899 to 1939. 

The statistical data on manufacturing, upon which the above 
analysis is based, clearly shows marked expansion in manufacturing 
in Tennessee from 1899 to 1939. The next question is: How does 
the rate of growth of manufacturing in Tennessee compare with the 
rate of growth of manufacturing in the United States as a whole, 
10 leading industrial states, and 13 southern states as a group? 

This question is answered precisely and definitely by the data 
presented in Table III. These figures show how value added by 
manufacture in Tennessee compares with the totals for: (1) the 
entire United States; (2) the 10 leading manufacturing states; (3) 
the 13 southern states as a group; and (4) each southern state sep- 
arately. To simplify this comparison, Tennessee's total value added 
by manufacture is expressed as 1.00 for every census period— regard- 
less of increases or decreases— and totals for other states are expressed 
as a multiple of the Tennessee figures. For example, the figure of 
98.75 for the United States in 1929 shows that value added by manu- 
facture in the United States was 98.75 times as large as value by 
manufacture in Tennessee in that year, and the figure of 2.15 shows 
that value added in North Carolina was 2.15 times the value added 
in Tennessee. 

Interpretation of the figures in the Table III is simple. They 
permit the reader quickly to determine two facts. First, by reading a 
given column vertically for a given census period, for example 1939, 
the reader is able to determine how manufacturing in the United 
States, in the ten leading industrial states, and in the 13 southern 
states compares with manufacturing in Tennessee. In 1939 manu- 
facturing in the United States was 77.14 times as large as in Ten- 
nessee, in the 10 leading states 54.56 as large, in North Carolina 
1.70 as large, and so on. 


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Second, by comparing the figures along a row for a given area, 
say the United States or North Carolina, the reader is able to de- 
termine at a glance, as between any two census periods, adjacent or 
far apart, whether manufacturing in the given area increased or 
decreased at a rate equal to, greater, or less than the Tennessee rate. 1 
If from the earlier to the later census period the figure increases, 
manufacturing in that area gained at a faster rate than manufactur- 
ing in Tennessee; if the figure remains the same, manufacturing in 
the given area and in Tennessee changed at the same rate; if the 
figure declines, then manufacturing in Tennessee gained relative 
to manufacturing in that area. For example, since value added by 
manufacture in the United States declined from 123.79 times value 
added in Tennessee in 1921 to 84.06 times the Tennessee figure in 
1933, manufacturing in Tennessee gained at the faster rate during 
this 12 year period. 

The following conclusions concerning the relative rate of growth 
of manufacturing in Tennessee and the other areas stand out clearly 
from an examination of the ratios in Table III. 

I. Tennessee and the United States 

1. For the period as a whole from 1899 to 1939, manufac- 
turing in Tennessee gained sharply as compared with 
manufacturing in the United States. Despite fluctua- 
tions in the ratios from one census period to the next, 
the general trend of the ratios from 1899 to 1939 is 
markedly downward. 

2. From 1904 to 1921, and especially during the First 
World War, from 1914 to 1919, manufacturing in 
Tennessee failed to develop as rapidly as manufac- 
turing in the nation as a whole. 

3. Practically all of Tennessee's gain in manufacturing 
relative to the United States was concentrated in the 
12 year period from 1921 to 1933. 

4. In the Great Depression from 1929 to 1933, manu- 
facturing activity declined less in Tennessee than in 
the United States, as indicated by the declining ratios 
during this period; but, in the recovery period from 
1933 to 1937, manufacturing in Tennessee lost ground 

^pon the assumption, which appears valid within reasonable limits, that 
the percentage-wise effect of upward and downward general price movements 
upon value added by manufacture was, roughly, equal in the different areas, 
this comparison of the relative rates of growth of manufacturing is valid, even 
though based on changing value series. 


slightly in relation to the nation as a whole, but gained 
much more rapidly than the nation from 1937 to 1939. 

II. Ten Leading Industrial States in 1937 1 

If we lump the 10 leading manufacturing states in 
1937, and compare the rate of growth of manufactur- 
ing in Tennessee with the rate of growth in the ten 
states as a whole, we find the same comparative rates 
as listed above for the United States. 

III. Tennessee and 13 Southern States as a Grouv Includ- 
ing Tennessee 

1. Manufacturing in Tennessee, likewise, grew at a 
faster rate than did manufacturing in the 13 southern 
states as a whole from 1899 to 1939, but Tennessee's 
gain relative to the South was less than the state's 
gain relative to the United States. 

2. As in the case of the United States, in the period 
from 1904 to 1919, and especially 1914 to 1919, 
manufacturing in Tennessee lagged relative to manu- 
facturing in the 13 southern states combined. 

3. All of Tennessee's gain in manufacturing relative to 
the Southern States was concentrated in the 16 years 
from 1919 to 1935. It is interesting to note that 
Tennessee's gain relative to the South began two 
years earlier and lasted two years longer than Tennes- 
see's gain relative to the nation as a whole. 

4. Manufacturing in Tennessee, as indicated by the de- 
clinging ratios, declined less rapidly than manufacturing 
in the South as a whole in the Great Depression from 
1929 to 1933 and gained more rapidly than the South in 
the first phase of recovery from 1933 to 1935. In the 
second phase of recovery from 1935 to 1939, how- 
ever, manufacturing in Tennessee increased at approx- 
imately the same rate as manufacturing in the South 
as a whole. 

IV. Individual Southern States 

1. In the period from 1899 to 1939 manufacturing in 
only three southern states, namely, North Carolina, 
Texas, and Oklahoma, increased more rapidly than 
manufacturing in Tennessee. 

^hese 10 states in order of value added by manufacture are: (1) New 
York, (2) Pennsylvania, (3) Illinois, (4) Ohio, (5) Michigan, (6) New Jer- 
sey, (7) Massachusetts, (8) California, (9) Indiana, and (10) Wisconsin. 


2. Manufacturing increased more rapidly than in Tennes- 
see, in Virginia, North Carolina, Louisiana, Texas and 
Oklahoma from 1899 to 1914; in all southern states 
except Kentucky in the war period from 1914 to 1919; 
in North Carolina and Texas from 1919 to 1929; 
and in Virginia and South Carolina from 1929 to 1939. 

V. All 48 States 

1. Manufacturing in only nine of the 48 states increased 
more rapidly than in Tennessee from 1899 to 1939. 
Four of these nine are large manufacturing states: 
California, Michigan, North Carolina, and Texas. 
The other five, new and relatively small manufactur- 
ing states in the West, are: Oklahoma, Oregon, Wash- 
ington, Idaho, and Nevada. 

2. In the \6-year 'period from 1923 to 1939, Virginia 
was the only state in which manufacturing increased 
more rapidly than in Tennessee. During this period, 
value added by manufacture increased 55.8 per cent 
in Virginia as compared with 44.9 per cent in Ten- 

3. In the decade from 1929 to 1939 only four states 
showed a more rapid rate of gain in manufacturing than 
Tennessee: Maryland, Virginia, South Carolina, and 

This analysis clearly shows that the rate of growth of manu- 
facturing in Tennessee when compared with the rates of growth of 
manufacturing in the United States, the South, and individual 
states, has been comparatively rapid, especially in the 16 years from 
1923 to 1939. In his satisfaction over this fact the reader should not 
overlook two significant facts which have important implications for 
an industrial development program in Tennessee. First, as shown 
in the early part of this chapter, Tennessee is still far from being 
one of the large manufacturing states. On the basis of value added 
by manufacture per square mile in 1939, 18 states ranked ahead 
of Tennessee and as many as eight of these reported more than five 
times as much value added by manufacture per square mile as Ten- 
nessee. By this same measure, in 1939, manufacturing in Tennessee 
was only 92.5 per cent as dense (highly developed) as the average 
for the nation as a whole. Second, the rapid growth of manufactur- 
ing in Tennessee in comparison with other states and areas has been 
due in a very large part, if not almost entirely, to the location and 
growth of five large plants, namely, the Aluminum Company of 


America (Alcoa), Bemberg and North American Rayon (Elizabeth- 
ton), Tennessee Eastman (Kingsport), and E. I. Dupont (Old Hick- 
ory). Thus the rapid growth of manufacturing in the state has not 
been due to the wide spread location of plants to take advantage of a 
variety of unique industrial locational factors, or in response to an 
area-wide industrial development program, but has resulted from 
what may well be the more or less fortuitous location of a few very 
large plants. 


Next in importance to the magnitude and relative growth of 
manufacturing in Tennessee examined above is: What industries 
and industrial groups make up the state total? What are the leading 
industries in Tennessee? Is manufacturing highly concentrated in 
a few industries or is it well diversified? How big are the major 
industrial groups in the state? What industries have been primarily 
responsible for the rapid growth of manufacturing in Tennessee in 
recent years? These are the questions which now claim our atten- 

Arranged in order of value added by manufacture, Table IV 
shows the 19 industries in Tennessee in 1937 which reported value 
added by manufacture of more than $3,000,000, which is slightly 
more than one per cent of the state total. 1 The absolute and rel- 
ative importance of manufacturing in these industries is indicated 
more accurately by value added by manufacture than by value of 
product, since in many industries, such as meat packing and flour 
milling, a large part of the value of product is accounted for by 
raw materials. 

x The Ceusus Bureau classes all manufacturing activity into roughly 300 
individual industries. According to the Census Bureau the classification must 
"be broad enough to cover all the activities— or at least, the principal activities— 
of such establishments." The bases of industrial classification are stated more 
specifically by the Census Bureau as follows: 

The effort has been made to distinguish, so far as practicable, each well- 
defined or well-recognized industry. The classification has been based on 
prevailing conditions as to the actual organization of industry and the 
distribution of the various branches of production among individual es- 
tablishments. It has been necessary, however, in some cases to combine 
the data for two or more industries which are usually considered fairly 
distinct from one another, because of the considerable amount of over- 
lapping among them. Such cases arise where, although the majority of 
the establishments concerned confine their business to one or another of 
the industries, a few important establishments combined the activities of 
two or more industries to such an extent as to render it impracticable to 
obtain separate data for the different lines of activity. ^Biennial Census 
of Manufactures, 1937). 




Per cent of 
Value Value state total 

added by of Number Value 

Rank Industry manu- prod- of of Wage 

facture uct wage Value prod- earn- 
Thousands of dollars earners added uct ers 

1. Rayon and aUied products 39,253 59,133 9,582 13.28 8.35 7.09 

2. Hosiery 15,209 29,219 14,554 5.14 4.13 11.03 

3. Printing and publishing, 

newspapers, periodicals _ 10,543 14,501 1,835 3.57 2.05 1.36 

4. Boots, shoes, non-rubber_ 10,041 20,898 4,464 3.40 2.95 3.30 

5. Heating and cooking ap- 

paratus, except electric_ 8,612 15,265 5,427 2.91 2.16 4.02 

6. Bread and other bakery 

products 7,854 15,866 2,846 2.66 2.24 2.11 

7. Knitted underwear 7,662 14,358 5,521 2.59 2.03 4.09 

8. Cotton woven goods (over 

12 inches in width) 6,744 13,542 5,064 2.28 1.91 3.75 

9. Drugs and medicines 5,782 8,811 761 1.96 1.24 0.56 

10. Non-alcoholic beverages.- 5,328 8,775 879 1.80 1.24 0.65 

11. Work and sport clothing, 

except leather 4,877 15,471 6,006 1.65 2.19 4.45 

12. Furniture (including store 

and office fixtures) 4,754 9,327 3,308 1.61 1.32 2.45 

13. Tobacco and snuff 4,626 14,493 1,057 1.56 2.05 0.78 

14. Meat packing, wholesale.. 4,454 29,491 1,803 1.51 4.17 1.33 

15. Printing and publishing: 

books, music and job 4,108 6,622 1,388 1.39 0.94 1.03 

16. Flour and other grain-mill 

products _ 3,880 22,674 1,142 1.31 3.20 0.85 

17. Cement 3,311 5,069 764 1.12 0.72 0.57 

18. Cottonseed oil, cake and 

meal 3,126 20,151 1,149 1.06 2.85 0.85 

19. Shortenings (other than 

lard), vegetable cooking 

oils and salad oils 3,089 36,457 726 1.04 5.15 0.54 

(a) Includes all industries which produced more than one per cent of the 

total of value added by manufacture in the state. 
Source: Biennial Census of Manufactures, 1937. 

The data presented in Table V show that manufacturing in 
Tennessee in 1939 was more diversified, that is, more equally dis- 
tributed among different industries, than in all but three of the 13 
other southern states, namely, Kentucky, Arkansas and Mississippi. 
Actually, only Kentucky has more diversified manufacturing than 
Tennessee. While Arkansas and Mississippi appear in Table V to 
have less concentration of manufacturing than Tennessee, these two 
states have 31.5 per cent and 25.8 per cent of all manufacturing, 


respectively, in lumber and timber products not elsewhere classified. 
Thus, these states have more than one-fourth of all manufacturing 
in lumber products alone. This statement holds irrespective of 
whether the measure of concentration of manufacturing be the per- 
centage of total value added by manufacture in the state in three, 
five or ten leading industries. 





Per cent of state's total value added 

by manufacture 


Three leading Five leading Ten leading 

industries industries industries 

Kentucky 13.5 19.3 30.9 

Arkansas 16.1 24.8 36.1 

Mississippi 19.6 28.0 41.7 

Tennessee 22.0 28.3 39.6 

Louisiana 23.2 29.8 40.8 

Florida 26.9 36.2 50.5 

Alabama 28.3 34.0 43.3 

Virginia 34.5 42.1 51.8 

Texas 34.9 41.1 52.3 

Georgia 36.6 42.3 52.5 

Oklahoma 42.3 51.7 66.7 

North Carolina 49.6 63.3 74.9 

South Carolina 66.4 72.2 79.1 

Source: Computed from data from Biennial Census of Manufacturers, 1937. 

As shown in Table IV, the leading industry in Tennessee, rayon 
and allied products, accounted for only 13.3 per cent of all value 
added by manufacture in the state and the second, hosiery, accounted 
for only 5.1 per cent of the total. No other industry dominates the 
state picture. There are 16 industries between hosiery, which re- 
ported slightly above five per cent of the total value added by manu- 
facture in the state, and cottonseed oil, cake and meal, which reported 
slightly above one per cent of the state total. As compared with 
Tennessee, South Carolina reported over 55 per cent of all value 
added by manufacture in cotton woven goods, and 1 5 per cent more 
in closely related textile lines; North Carolina reported over 23 per 
cent in cigarettes and 43 per cent more in five leading textile lines; 
Georgia had over 26 per cent in woven goods; Arkansas and Missis- 
sippi depended heavily upon lumber and timber products with 31 and 
26 per cent, respectively; in Oklahoma and Texas petroleum refining 
accounted for 27 and 25 per cent, respectively; and Florida had over 
30 per cent in cigars and lumber and timber products. 





















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Table IV and the above discussion consider the specific types of 
industries as reported by the census. A different picture results from 
a study of broad industrial groups, classified by lumping together 
all specific types of industries which are closely related. On the 
basis of the broad industrial groups used by the Census of Manu- 
factures and subject to considerable error from unavoidable shifts 
in classification over the period, the relative importance of manu- 
facturing in the 12 broad industrial groups in Tennessee for eight 
census periods from 1899 to 1937, as measured by value added by 
manufacture, is indicated roughly by the dollar figures in Table 
VI and the percentages in Table VII. 

In 1937, chemical and allied products, including the rapidly 
growing rayon industry, was the leading industrial group in 
Tennessee and accounted for more than one-fourth of all value 
added by manufacture in the state. The second leading industrial 
group, textiles and their products, accounted for roughly one-sixth 
of the state total, and the third group, food and kindred products, 
reported approximately one-eighth of the state total. The fourth and 
fifth groups, forest products and paper, printing, publishing and 
allied products, respectively, where slightly less than one-third as 
large as the leading chemical group in 1937. 

The three leading groups, chemicals and allied products, tex- 
tiles and their products, and food and kindred products accounted 
for 55.0 per cent of all the manufacturing in Tennessee in 1937, and 
the five leading groups reported 72.3 per cent of the state total. 
There has been no marked tendency toward concentration of a larg- 
er per cent of the state's total manufacturing in the leading indus- 
trial groups from 1899 to 1937. The two leading industrial groups, 
at that time, forest products and food and kindred products, repre- 
sented 42.3 per cent of the state total in 1899, 45.0 per cent in 1904, 
40.0 per cent in 1909, and 35.7 per cent in 1919. The two leading 
industrial groups, forest products and textiles, represented 31.6 per 
cent of the state total in 1919 and 31.7 per cent in 1925. The 
chemical and textile groups, the two leading groups at the time, 
accounted for 29.4 per cent of the total in 1929 and increased their 
share to 42.3 per cent in 1937. The five leading industries— rather 
consistently the leading five but not in the same order— accounted for 
65.9 per cent of all manufacturing in Tennessee in 1904, 59.7 per 
cent in 1919, 62.4 per cent in 1929, and 72.3 per cent in 1937. The 
marked increase in the relative importance of these five groups in 
recent years has been due, as in the case of the two leading industries, 
to the rapid rise of the textile group and the chemical group which 
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The four most important changes in the relative importance of 
the 12 broad industrial groups have been: (1) the decline of the 
manufacture of forest products, (2) machinery, (3) the marked 
increase in the manufacture of textiles, and (4) chemical and al- 
lied products, including rayon. Forest products accounted for 31.4 
per cent of all manufacturing in Tennessee, in 1904, but this group 
declined steadily, relative to all industry, until in 1937 it repre- 
sented only 8.3 per cent of the state total. Machinery, other than 
transportation equipment, also declined steadily from 7.0 per cent of 
the state total in 1909 to only 1.3 per cent in 1937. Other indus- 
trial groups, such as iron and steel; leather and its manufacture; 
stone, clay and glass products; and the non-ferrous metals showed 
little significant relative changes. In general they grew at about the 
same rate as total manufacturing in the state. Manufacturing in the 
food and kindred products group increased at a rate but slightly less 
than total manufacturing in the state, as shown by the fact that this 
group in 1899 accounted for 15.4 per cent of manufacturing in Ten- 
nessee, 13.9 per cent in 1909, 13.4 per cent in 1929, and 12.7 per cent 
in 1937. The paper, printing, publishing and allied products group 
has grown slightly more rapidly than all manufacturing in Tennessee. 

The most marked change in manufacturing in Tennessee in the 
18 years ending in 1937 was the rapid growth of the chemical and 
textile groups. Reference to either table shows that the manufac- 
ture of chemical and allied products, including rayon, and textiles 
and their products has grown much more rapidly than total manu- 
facturing in the state. In 1899, these two industrial groups produced 
only 15.0 per cent of all value added by manufacture in the state and 
in 1914 only 17.4 per cent, but by 1929 they accounted for 29.4 per 
cent of the total and in 1937 reported 42.3 per cent of all value 
added by manufacture in Tennessee. 

In fact, most of the increase in value added by manufacture in 
Tennessee over the last 18 years has resulted from the expansion in 
the chemical and textile industries. From 1919 to 1937 value added 
by manufacture in Tennessee increased from $211,496,000 to $295,- 
627,000, a jump of $84,141,000. Chemicals and textiles alone ac- 
counted for $75,759,000, or 90 per cent of this increase. Over the 
depression period, 1929 to 1937, value added by manufacture in the 
textile group showed a very small gain, but in the chemical group, 
value added increased $28,327,000 against a decline of $57,135,000 
in the other 10 groups. 



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Manufacturing in Tennessee is so largely concentrated in a few 
counties that large areas in the state are without any manufacturing 
except a few very small plants supplying purely local markets. Out 
of the 95 counties in Tennessee, the Census of Manufactures in 1939 
reported the number of wage earners in manufacturing for only 79 
counties and value added by manufacture for only 66 counties. 1 In 
this year only 21 of the 79 reporting Tennessee counties reported 
more than 1,000 wage earners in manufacturing and only 27 of the 
66 reporting counties reported value added by manufacture of more 
than $1,000,000. The leading 15 of these 27 counties are shown in 
Chart 5 below. Aside from the 16 counties in which the number 
of manufacturing establishments was too small to permit the figures 
to be reported by the census, there were 1 5 counties with fewer than 
100 wage earners in manufacturing and 19 additional counties with 
only 100 to 500 wage earners. Of the 66 counties for which data are 
available, 25 reported less than $500,000 value added by manufac- 
ture. The concentration of manufacturing in a few counties of the 
state is strikingly brought out by the fact that in 1939 the 21 leading 
counties, all those with 1,000 or more wage earners in manufactur- 
ing, reported 112,073, or 85.0 per cent, of the 131,874 wage earners 
in manufacturing in Tennessee, while on the basis of value added by 
manufacture the 27 leading counties which reported value added by 
manufacture of $1,000,000 or more for which data are available ac- 
counted for $272,864,000, or 85.2 per cent, of the state total. The 
15 counties which reported more than $2,000,000 value added by 
manufacture reported $255,803,000, or 79.9 per cent of all manu- 
facturing in the state. 

The marked concentration of manufacturing in 1939 in the 
four large city counties and the next 10 counties in order of size, on 
the basis of value added by manufacture and the number of wage 
earners in manufacturing is clearly shown in Chart 6. The 24 
leading manufacturing counties reported 84.2 per cent of the total 
value added by manufacture in Tennessee, and 87.1 per cent of the 
wage earners in manufacturing. The six leading counties, the four 
large city counties of Dividson, Shelby, Hamilton, and Knox, plus 
Sullivan and Carter, in 1939, accounted for 70.7 per cent of all 

^or many counties the data are withheld by the Bureau of the Census 
"to avoid disclosing approximations of data for individual establishments." 















manufacturing in Tennessee. Data are not available from Blount 
County, but adding it to the list, it is certain that these seven coun- 
ties would account for, roughly, 75 to 80 per cent of all manufactur- 
ing in the state. 

Is manufacturing in Tennessee becoming more or less con- 
centrated in the four leading counties? The following percent- 
ages show the rate of growth of manufacturing in the four large 
city counties separately and as a group as compared with the rate of 
growth of manufacturing in the state as a whole: 

County Per Cent of State Total Value Added by Manufacture 

1899 1919 1929 1939 

Davidson 19.4 16.3 20.0 18.2 

Shelby 19.4 23.7 24.3 18.0 

Hamilton 12.8 18.0 16.2 12.9 

Knox 8.2 10.2 10.1 9.2 

Total 59.8 68.2 70.6 58.3 

The rising percentages of the state total from 1899 to 1929 shows 
that manufacturing in the four large city counties together grew more 
rapidly than manufacturing in the state as a unit; but, from 1929 to 
1939 manufacturing in the rest of the state definitely gained rela- 
tive to manufacturing in these four counties. 

In the recent period from 1929 to 1939, the largest gains in 
manufacturing were registered by the fifth and sixth manufacturing 
counties in order of size, namely, Sullivan and Carter, respectively. 
In this period, Sullivan (rayon, plastics, paper, printing) reported an 
increase in value added by manufacture of $16,819,000, or 186.2 per 
cent, and Carter (rayon) reported an increase of $7,481,000, or 120.7 
per cent, as compared with a decline of 0.8 per cent for the state as 
a whole. Although figures are not available from the Census of 
Manufacturers, Blount County, the location of a large plant of the 
Aluminum Company of America, has also shown large gains. Among 
the 27 counties in Tennessee which reported value added by manu- 
facture of $1,000,000 or more in 1939, 16 counties reported percen- 
tage gains in value added by manufacture from 1929 to 1939 as 












Per cent of gain in 

value added by Value added for manu- 

County manufacture from facture in 1939 (thou- 

1929 to 1939 sands) 

Sumner 622.6 $ 1,635 

Coffee 219.1 1,808 

Sullivan 186.1 25,854 

Maury 124.7 4,110 

Marshall 120.9 1,712 

Carter 120.7 13,681 

Bedford 93.6 2,734 

Hamblen 53.4 1,546 

Bradley 33.2 4,767 

Greene 27.5 1,010 

Dyer 16.6 1,699 

Obion 153 2,370 

Roane 10.7 2,454 

Cocke 2.1 1,111 

Franklin 0.5 1,056 

McMinn 0.4 3,212 

The other 11 counties reporting value added by manufacture of 
$1,000,000 or more in 1937, suffered a decline from 1929 to 1939. 
In this same period some of the small manufacturing counties, 
notably, Dickson, Giles, Hardin, Jefferson, Lincoln, and Lawrence 
reported significant gains in manufacturing. 

As shown by the map on the opposite page the concentration of 
manufacturing in the eastern section of the state is striking. Ranked 
acording to the number of wage earners in manufacturing in 1939, 
eight of the 10 leading manufacturing counties (all except David 
son and Shelby) were in East Tennessee. Using another measure- 
value added by manufacture— seven of the 10 leading counties (all 
except Davidson, Shelby, and Madison) were in East Tennessee. 
However, most of the medium-size manufacturing counties, those 
reporting $1,000,000 to $2,500,000 value added by manufacture and 
1,000 to 2,500 wage earners, are located in Middle and West Ten- 

Certain conclusions which stand out from the above analysis of 
the amount, growth, composition, and geographical distribution of 
manufacturing in Tennessee which are important in considering an 
industrial development program for the state are summarized below. 

1. While on the basis of value added by manufacture in 1939 
Tennessee ranked 17th among the states, it is still far from 


being a large manufacturing state as compared with the 
more highly industrialized states or with the per area or per 
capita average for the country as a whole. 

2. The rate of growth of manufacturing from 1899 to 1939 
has been more rapid in Tennessee than in the United 
States and the thirteen southern states as a whole. From 
1923, to 1939, Virginia was the only state in which the 
rate of growth of manufacturing was greater than in Ten- 

3. This more rapid rate of growth has been due almost entirely 
to the location and growth of five or six large plants. 

4. Manufacturing in Tennessee is more diversified than in any 
other southern state except Kentucky. 

5. In terms of the broad industrial groups used by the Census 
of Manufactures, there has been no marked increase in the 
concentration of industry either in the two or in the five 
leading groups from 1899 to 1937. Due to the rapid growth 
of chemicals and textiles there has been an increase in the 
percentage of manufacturing in these two leading groups 
since 1927, but the present concentration in these two 
groups is no higher than in the two which were leading 
groups in the early part of the period from 1899 to 1937. 

6. The outstanding changes have been: (1) the absolute and 
relative decline of industries based on forest products and 
(2) the rapid increase in recent years of textiles and chem- 

7. Approximately 58 per cent of all manufacturing in Ten- 
nessee is concentrated in the four large city counties; about 
15 per cent more is in Sullivan, Carter and Blount Counties; 
and, more than 80 per cent of all manufacturing is in the 
15 leading counties. 

8. There are, roughly, 65 out of the 95 counties in the state 
which have practically no manufacturing. 

9. From 1899 to 1929 manufacturing in Tennessee was more 
and more concentrated in the four large city counties as 
manufacturing in them grew more rapidly than in the 
state as a whole; but, from 1929 to 1939 manufacturing 
in the rest of the state gained relative to these four. Sul- 
livan, Carter, Blount, and several small counties showed 
marked absolute and relative gains. 

10. Aside from Shelby and Davidson Counties, manufacturing 
is largely concentrated in eastern Tennessee. 




The brief analysis in the preceeding chapter of the amount, 
growth and distribution of manufacturing in Tennessee showed 
that both on the basis of the amount and rate of growth of manu- 
facturing the state compares favorably with the other southern states. 
In fact, in the 16 years from 1923 to 1939 Virginia was the only 
state in which the percent of increase of manufacturing was greater 
than in Tennessee. While the rate of increase may be high and the 
amount of manufacturing in the state very small, on any reasonable 
comparative basis, in 1939, only two or three southern states had a 
larger volume of manufacturing than Tennessee. 1 

As compared with some of the more highly industrialized states 
in the North and East, however, Tennessee is far from being a large 
manufacturing state. In 1939, as shown in the preceding chapter, 
16 states reported a larger total value added by manufacture than 
Tennessee and the same number employed more wage earners in 
manufacturing. Such comparisons of manufacturing between Ten- 
nessee and the other states in terms of state totals are largely vitiated, 
however, by the fact that area and population differ from state to 
state. On the basis of certain measures of manufacturing destiny 
which take account of area and population differences, Tennessee 
loses ground relative to the highly industrialized states. If the measure 
of density of manufacturing be value added by manufacture per 
square mile, as Table I in Chapter II shows, 18 states showed more 
manufacturing than Tennessee in 1939; whereas, if the measure of 
density be the number of wage earners in manufacturing per 1,000 
population, 23 states ranked above Tennessee. 

Admittedly, a smaller amount and density of manufacturing in 
Tennessee than in other states is not an effective argument for more 
manufacturing in the state or for any program aimed at increasing 
the rate of industrial growth; but it does show that, as compared with 
the more industrialized states, Tennessee is far behind in manufac- 
turing. This fact certainly raises the question of whether the present 
position of Tennessee among the manufacturing states accurately 
reflects the state's natural resources and advantages for manufactur- 
ing and thus poses the question of whether that position could be 
improved by any reasonable industrial development program. 
x See pages 9-12. 


There are, however, several forceful arguments in favor of 
greater industrialization in the state. There appear to be four im- 
portant reasons why responsible citizens in Tennessee should de- 
vote more attention in the future than in the past to the formulation 
of a carefully planned long-range policy and program for industrial 
development. First, there is the need for further industrialization 
in Tennessee to provide employment and to raise the per capita in- 
come level. Second, there are several regional and state changes 
which are likely to affect one way or another the rate of industrial 
growth in Tennessee. Third, there is increased competition for new 
industries from other southern states, as well as states outside of the 
South, in the form of research and promotional activities. Fourth, 
the incompleteness and inadequacy of our own industrial policy and 
program offer opportunities for considerable improvement. 

The first and second of these major reasons are considered in 
some detail in this chapter and the other two are examined in the 
two following chapters. 

As was shown in Chapter II, there are, roughly, 65 counties in 
the state with practically no manufacturing except very small plants 
supplying small local markets. Employment and income in these 
counties are dependent exclusively upon agriculture and other raw 
material production. Irrespective of the demand for a larger state 
total, there is certainly serious need for greater diffusion of industry 
throughout the state. In most cases such diffusion must come, if it 
comes at all, through the development of new industries in these 
areas rather than through the movement of industry to those counties 
from other areas within the state. 

Some communities have suffered a decline of industrial activity 
due to the depletion of resources, shift in the demand for type of 
product, and technological changes. Certain industries have declined 
in importance in some areas and other industries have moved else- 
where. For a number of years industries based on lumber and timber 
products have been declining. Exhaustion of resources and techno- 
logical changes have been responsible for the near or complete aban- 
donment of many industries based on forest products. To cite only a 
few instances, the closing of the blast furnaces at Rockwood after en- 
countering high cost ores, the transfer of the railroad shops from Et- 
owah, the decline of woodworking industries in Cookeville, the clos- 
ing of the coal mines and the decline of forest products industries in 
Grundy County, among others, have seriously reduced industrial em- 
ployment and payrolls in these areas of the state and in some cases 


have created serious readjustment and rehabilitation problems. 1 In 
these and other areas, new industries are needed to take the place of 
those lost. Serious consideration needs to be given to methods of aid- 
ing the declining industries to stay in business and continue to pro- 
vide employment and income. This is not to argue that given indus- 
tries in particular areas ought to be saved if demand or supply, that is 
cost and price, conditions are such that they cannot compete. But for 
the declining industries, it is not only reasonable but important to 
raise three questions. First, are there any discoverable artificial re- 
strictions and limitations responsible for the decline of the industry? 
Second, are there any feasible changes in source and type of raw 
materials, type of finished products, markets, methods of production 
or distribution which could place the industry in a more favorable 
competitive position: 5 Third, if these are not feasible or sufficient, 
are there any other industries which could possibly be developed in 
the region to take the place of declining industries operating at a 
competitive disadvantage? 

In several areas in the state additional industry of particular 
types is obviously badly needed to correct an unbalanced employment 
condition. In some towns and areas the industries employ principally 
women; here, more industries giving employment to men are needed. 
In other towns the present industries employ largely men; there are 
relatively few jobs for "by-product women." In still other towns the 
industries provide employment only for unskilled labor; consequently, 
there is little opportunity for the worker to obtain a more skilled job 
as his skill improves. Small industries employing highly skilled 
labor are needed in many of these areas. 

In the present stage of industrial development in Tennessee, the 
economy is largely a raw materials one. In 1930, the latest year for 
which complete census figures are available, 413 per cent of all 
gainfully employed persons 10 years of age, or over, in Tennessee 
were employed in agriculture, extraction of minerals, and forestry 
and fishing, as compared with only 24.0 per cent in the same type 
of employment for the nation as a whole. Agriculture alone ac- 
counted for 39.3 per cent of the gainfully employed in Tennessee 
but only 21.4 per cent of the national total. Looking at the matter 
from the side of income, we find that a much higher per cent of the 
total income is derived from agriculture in Tennessee than in the 
United States as a whole. 

The ore mines at Rockwood are being reopened and blast furnaces put 
into operation (April, 1941) as a result of the increased demand for iron 
and steel under the defense program. 


Per cent of Total Income Payments from Agriculture 1 

1919-21 1929-33 1933-37 

Tennessee 25.98 10.22 1379 

United States 13.68 6.49 7.95 

Ratio of Tennessee to United States 1.90 1.57 1.73 

If we look at the matter another way, we find that income pay- 
ments in Tennessee from agriculture and non-farm industries ac- 
counted for the following percentages of the United States total: 

1919-21 1929-33 1933-37 

Agriculture „ 2.28 1.64 2.06 

Non-farm industries 1.03 1.00 1.11 

These figures show that Tennessee accounts for a much larger share 
of the United States total income payments from agriculture than it 
does of the United States total from non-farm industries. All avail- 
able data show conclusively that Tennessee is much more dependent 
directly upon agriculture as a source of income than is the nation 
as a whole. 

Certain shifts in the demand for agricultural products also sug- 
gest that many persons formerly employed in agriculture must find 
employment, if they find it at all, in non-farm industries. The sub- 
stitutes for cotton, such as rayon, and large increases in foreign com- 
petitive producing areas have forced a large reduction of cotton acre- 
age in the South in recent years. There is little in the present out- 
look to justify the belief that this loss will be recovered. Tennessee 
and the South are faced with a large supply of idle or unused farm 
lands as a result of the loss of foreign markets for cotton. Tobacco, 
too, is on the wane; its production has gone beyond consuming mar- 
kets. The increased use of mechanical power has gradually released 
large areas and thus large numbers of workers formerly employed in 
producing food for work animals used on the farm. Technical im- 
provements and increased mechanization promise to reduce still fur- 
ther employment opportunities on the farm. If southern agriculture 
should improve to the point where it could support adequately the 
present employed, there still remain the problems of how to find em- 

^onald S. Murray, "Income in the Southern States." A paper prepared 
for the sixth Annual Southern Social Science Research Conference, Chatta- 
nooga, Tennessee, March 7-9, 1940. The 1919-21 figures were computed by 
Murray, from the King-Leven estimates of income. Maurice Leven, Income 
in the Various States. National Bureau of Economic Research. The 1929- 
37 figures were taken, by Murray, from the following source: R. R. Nathan 
and J. Martin State Income Payments, 1929-37, U.S. Department of Com- 
merce, May, 1939. 


ployment for (1) those now unemployed and (2) those displaced by 
the continuance of the trend of changes mentioned above, such as, 
mechanization and competition of other products. 

Tennessee's great dependence upon the production of raw ma- 
terials and the cruder forms of manufacture are reflected in lower 
per capita wealth, income, and living standards. As was pointed out 
by the National Emergency Council in its report on Economic Con- 
ditions of the South: 

The paradox of the South is that while it is blessed by Nature 
with immense wealth, its people are the poorest in the country. 
Lacking industries of its own, the South has been forced to trade 
the richness of its soil, its minerals and forests, and the labor of its 
people for goods manufactured elsewhere. 1 

In spite of this wealth of population and natural resources, 
the South is poor in the machinery for converting this wealth to 
the use of its people. 2 

As a consequence of this fact southern incomes are low and the 

southerner finds the terms of trade against him. 

For mining its mineral wealth and shipping it away in a raw 
or semi-finished form, the South frequently receives nothing but 
the low wages of unskilled or semi-skilled labor. The wages for 
manufacturing this natural wealth into finished products often do 
not go to southerners, but to workers in other areas; and the pro- 
fits likewise usually go to financial institutions in other regions. 
When a southerner buys the finished product, on the other hand, 
the price he pays includes all the wasteful cross-hauling involved 
in the present system. 3 

Mr. John P. Ferris of the Tennessee Valley Authority makes 

a similar observation and points to the solution: 

... it seems unlikely that the Southeast can have adequate 
income as long as it remains, so largely, a raw materials region. 
We must increasingly add value to our raw materials. This is 
accomplished as industry applies scientific knowledge, engineering 
brains, and labor to the raw materials. 4 

If the people of Tennessee are to obtain a higher income, raw ma- 
terial production must be supplemented by the establishment of 
more manufacturing industry and related service occupations. 

In addition to our dependence upon raw material production, 
a large part of manufacturing in Tennessee is at an "elementary 
level", that is, it is devoted to the production of coarse or partially 
finished goods which are frequently shipped elsewhere for finishing 

'Page 7-8 
2 lbid., p. 8. 
*lbid., p. 55. 

4 Resources and Their Uses. Speech to National Resources Committee, 
Chattanooga Chamber of Commerce, Chattanooga, January 15, 1940. 


or further manufacturing. A relatively small proportion of manu- 
facturing in the state consists of finely finished manufactured prod- 
ucts which require highly skilled labor and the more elaborate 
technologies. On the other hand, a large part of our manufactur- 
ing employs large quantities of unskilled, or semi-skilled labor at 
relatively low wages. Obviously, per capita and total income from 
manufacturing are not as high as if manufacturing in the state con- 
sisted of a larger proportion of more highly processed products. 

Tennessee's heavy dependence upon agriculture, raw materials, 
and the coarser grades of manufacturing are important immediate 
causes of the relatively low per capita income level. With 1.39 per 
cent of the total area of the United States, Tennessee averaged in the 
five years from 1933-37, according to estimates, 2.21 per cent of the 
population but only 1.19 per cent of the aggregate income payments 
of the country. 1 The following figures show the low level of per 
capita income in Tennessee as compared with the rest of the country: 

Average Per Capita Aggregate Income 2 

1919-21 1929-33 1933-37 

Tennessee $317 $242 $247 

Thirteen southern states 3 352 261 262 

United States 581 500 460 

Thirty-five states outside of the South... 670 591 537 

Thus, average per capita income payments in Tennessee were only 
55 per cent of the United States average in 1919-21, 48 per cent in 
1929-33, and 54 per cent in 1933-37. As compared with the 35 
states outside of the South, average per capita income payments in 
Tennessee were only 47 per cent as large in the three years 1919- 
21, 41 percent in 1929-33, and only 47 percent in 1933-37. 
Even more strikingly, in all three periods, average per capita income 
payments in Tennessee were lower even than the averages for the 
1 3 southern states as a whole. 

The per capita income in an area depends upon (1) the level 
and distribution of technical training and technology, (2) the ratio 
of population to resources, (3) the degree to which the factors of 
production are employed, and (4) the allocation of the factors of 
production between alternative uses. 

The second of these, the high ratio of population to resource 
utilization, is so fundamental in the explanation of low per capita 

Murray, "Income in the Southern States," op. cit.; estimates by Nathan 
and Martin. 

2 IMd. 

3 The thirteen southern states: Virginia, Kentucky, Arkansas, Oklahoma, 
Texas, Louisiana, Mississippi, Tennessee, Alabama, Florida, Georgia, North 
Carolina and South Carolina. 


income in Tennessee that it deserves special consideration. This 
argument has been ably put by Carter Goodrich and others in 
speaking of the South. 

The fundamental cause of the low level of living is exces- 
sive pressure of population on available resources. Extraordinarily 
high rates of natural increase and insufficient emigration have 
resulted in a rural population far greater than the agricultural, 
forest, and mineral resources can support satisfactorily. 1 

As a direct result of low per capita income and a relatively low 
level of living in Tennessee, the state has been exporting population. 
Even though the total population of the state has increased with 
each decennial census (the increase from 1930 to 1940 was 299,285 
or 11.9 per cent), considerable net migration has taken place. But 
the number of persons born in Tennessee, who have moved out of 
the state, exceeds the number of persons born elsewhere, who have 
moved into Tennessee. The essential point is that there has been a 
movement of population from the state greatly in excess of the 
movement of population to the state. 

The causes of migration are many and complex, but it is 
pretty clear that a differential in economic opportunity has been the 
predominant factor in population movements out of Tennessee and 
the South. As the National Emergency Council concluded: "The 
export of population reflects the failure of the South to provide 
adequate opportunities for its people." 2 On the question of popu- 
lation and the great dependence of the South on raw material 
production, Mr. Allredge, then with the Tennessee Valley Authority 
but now with the Interstate Commerce Commission, noted: 

This has proved too many persons for these raw material-pro- 
ducing activities adequately to support aid, as a consequence, these 
states have experienced over a number of decades a constant mi- 
gration of native-born inhabitants to sections of the country of- 
fering employment at higher income levels than were afforded by 
the predominant production of raw materials. 3 

The important fact is that a steady net stream of workers is 
leaving Tennessee for regions which offer greater economic oppor- 

This fact is clearly shown by the data below. The figures 
under cumulative loss through migration represent the excess of 

barter Goodrich, et al, Migration and Economic Opportunity, (Philadel- 
phia: University of Pennsylvania Press, 1936), pp. 61-62. 

2 National Emergency Council. Economic Conditions of the South, op. 
cit., pp. 17-18. 

3 J. H. Allredge, Industrial Resources of the Tennessee Valley and Their 
Commercial Possibilities. (Unpublished paper). 


persons born in Tennessee but living outside the state over persons 
born in other states but living in Tennessee. 

Per cent of 
Cumulative total native 

loss population 

Census through born in 

year migration the state 

1930 . 458,167 15.0 

1920.. 426,312 15.5 

1910 384,788 15.1 

1900 301,035 13.1 

1890 277,210 13.8 

1880 261,869 14.6 

1870 192,145 13.4 

From these figures it appears that Tennessee not only has been 
shipping out its raw materials to be processed, but, also, has been 
sending a large supply of its labor to do the processing. 

The full implications and net results of the export of popula- 
tion upon the population exporting region are difficult to determine 
precisely, but most students agree that continued population export 
affects seriously the wealth, income and living standards, as well 
as the cultural patterns of the population exporting region. 

The migration of the healthy and frequently the ablest and 
best trained young persons tends to produce static customs and 
habits and reduce the rate of technological progress in the state. 
Because of its failure to offer as good employment opportunities 
as other states, the state loses many of its abler technical persons 
and more highly skilled workers. The bulk of the migration ap- 
pears to be at, or just after, the age when workers reach the pro- 
ductive period. This obviously produces a higher ratio of depen- 
dents, children and older persons, in Tennessee per thousand pro- 
ductive adult workers than in the nation as a whole. In 1930, the 
population under 20 years of age comprised 43.8 per cent of the total 
in Tennessee as compared with only 38.8 per cent in the United 
States. 1 This higher percentage of youth in the population, partially 
the result of population export, places a heavier burden on the per 
productive adult worker for equivalent education and other services 
to youth. It means that Tennessee must support a higher pro- 
portion of its population in schools than the industrialized states. 

2 This higher percentage of persons under 20 years of age is not due en- 
tirely to migration of those above this age. A birth rate higher than for the 
nation as a whole accounts for a large part of the difference. 


The reduced number of productive workers and the transfer of 
wealth make more difficult the support of local institutions. Even 
assuming the same real income per productive worker as in other 
regions, this higher ratio of dependents per productive worker would 
result in a lower per capita income and lower standards of living. 
The migration of productive workers, by decreasing the population 
of productive age, lowers the rate of economic growth even if it 
does not result in an absolute reduction of wealth of the population 
exporting area. 

Equally serious, the net migration of productive workers in- 
volves a large export of wealth from the poorer parts of the state. 
Tennessee "bears the expense of rearing and educating a large num- 
ber of children" who leave the state just at the time "they begin to 
repay this cost." Other regions get these workers practically with- 
out cost. This net movement of productive workers results in a 
fairly large transfer of wealth from Tennessee to the states receiving 
this migrating population. No reasonably satisfactory measure of 
this loss of wealth is available, though Dr. Baker of the United States 
Department of Agriculture has estimated that at pre-depression prices 
"it costs $2,000 to $2,500 to rear and educate the average child on 
American farms to the age of 15, when he may be assumed to be self- 
supporting . . . ." 1 It is impossible to estimate very accurately the 
loss of wealth from migration from Tennessee, but it is certain that 
the net outward population movement represents a net export of 
wealth. Thus Tennessee, too poor in utilized resources to provide 
equivalent economic opportunity for all of its productive workers, 
is made still poorer by the loss of wealth used to train productive 

There is another side to the picture, however, which must not 
be overlooked. Given, first, the rate of population increase in Ten- 
nessee and the present utilization of economic resources in the state, 
that is, the present ratio of population to utilized resources, and 
second, the ratio of population and resources in other states and 
areas, the population export from Tennessee is not a clear loss. If 
the real rates of return (remuneration) of equivalent labor are 
higher in other regions than in Tennessee, after the reduction of 
transportation costs, then the flow of labor out of Tennessee in- 
creases the production of economic goods and services in other re- 
gions more than it decreases their production in Tennessee. Fur- 
ther, if, as is maintained in this study, one reason for low per capita 

j O. E. Baker, "Rural-Urban Migration and the National Welfare." As- 
sociation of American Geographers, XXIII (1933), p. 86. 


income and low standards of living in Tennessee is the high ratio 
of productive population to utilized resources, then a reduction in 
this ratio through the migration of productive workers would raise 
the real income per productive worker left in Tennessee. As long 
as there is a differential real income to an equivalent unit of labor 
in other regions as compared with Tennessee, the migration of pro- 
ductive workers from Tennessee raises the real income per capita of 
the workers remaining in the state beyond what it would be if there 
were no migration. It is this economic benefit from migration which 
must be balanced against the loss of wealth from exporting pro- 
ductive adult workers. Without migration, greater over population 
relative to resources in Tennessee probably would have been the 

Insofar as low per capita income in Tennessee is the result 
of a high ratio of population to developed resources— and there can 
be little doubt that it is one if not the fundamental cause— per capita 
income may be raised by proper adjustments on either side of the 
ratio. First, the ratio of population to resources may be reduced by 
a reduction of population through control of the rate of increase- 
birth control and migration. Second, the ratio of resources to 
population may be raised by the greater utilization of resources and 
the importation of capital. 

Students of population and economists have given much thought 
to raising per capita income in depressed or subnormal areas through 
the adjustment of population to resources. Most frequently they 
have sought this adjustment through the first method, namely, a re- 
duction in population through migration and birth control. Such 
an attack upon the problem is important and in the right direction. 
In many cases all or most of the adjustment in the ratio of popula- 
tion to resources must be made from the side of population alone. It 
is equally important, however, to determine if the other blade of 
the scissors— the development of resources— is doing its share of the 
cutting. In the attempt to increase income and economic levels of 
living careful attention should be given to the possibilities of in- 
creasing the ratio of resources to labor through ( 1 ) the movement of 
capital and technology into the region and (2) the more complete 
discovery and effective utilization of resources. 

Raising income levels through birth control and migration in a 
democratic system with given prejudices and inertia is likely to be 
extremely slow and only partially successful. In Tennessee at 
present there is little effort to make birth control information effec- 
tive for persons in those areas of the state where the rate of popula- 


tion increase is most rapid relative to available economic resources. 
Even assuming immediate effective birth control, which is far from 
realization either in terms of the existing or any forseeable program, 
the rate of increase of productive adult workers is largely determined 
for 15 to 20 years by the children already born in the state. Aside 
from widespread increase in mortaility rates from war, epidemics, etc., 
population reduction in the next decade or two must come, if it 
comes at all, through migration. 

Migration in many cases is only a partial and, as we have seen, 
in many respects an expensive and undesirable solution. The ex- 
port of the better trained productive workers tends to produce static 
conditions, reduces the rate of technological progress, results in a 
serious loss of wealth embodied in exported adult productive work- 
ers, makes more difficult the maintenance of service institutions and 
reduces living standards of the local population by increasing the 
number of dependents per productive adult worker. Furthermore, 
in the past migration has been too slow to equalize the return to labor 
of the same skill in the same occupation in Tennessee and elsewhere 
as is strikingly evidenced by the existence of differentials in wage 
and income levels. The imperfect mobility of labor due to home 
ties, lack of knowledge of opportunities, financial ability to move, 
etc., is well known and raises serious questions as to whether migra- 
tion can be increased sufficiently by appropriate measures to raise 
significantly income levels in many areas of the state. In view of 
existing income differences for equivalent labor in Tennessee and in 
other regions, more attention should be given to the possibilities of 
increasing the mobility of labor. Yet it must be remembered that 
in general it is the least skilled workers, those on the lowest economic 
level, who need to move most, who are least likely to move. 

The attack upon the problem of low per capita income in terms 
of raising the ratio of resources to population through the negative 
process of birth control and migration offers at best an extremely 
slow and only partial solution. This conclusion would seem to 
argue forcefully for every reasonable effort to increase per capita in- 
come by increasing the utilization of economic resources, such as 
some program aimed at more complete discovery and development 
of resources and the establishment of industries for processing Ten- 
nessee raw materials through higher stages. 

As for raising income through industry, students of the problem 
in Georgia suggest four possible means. 

In general there are four ways of increasing our net income: 
(1) by initiating production or increasing our output of those 


goods in which we have a cost advantage over other producers; 
(2) by increasing the quality or marketability of those goods 
which we offer for sale; (3) by carrying production through more 
advanced stages, and (4) by financing, and managing our own 
enterprises. 1 

Industrial development increases the income of a community 
through: (1) payments for labor and materials used in the con- 
struction of the plant, (2) the increased payroll from operations, 
(3) payments for locally produced raw materials, and (4) the sec- 
ondary effects on services, trade, and allied industries created by the 
expenditure of the larger payroll and raw material receipts. In 
some cases, of course, all four ways may not operate. For example, 
the new industry may use an old plant or all raw materials may be 
bought out of the state. In all cases, the four ways produce vary- 
ing relative effects upon the total income stream of the community. 
In the case of local industries using farm products the increase in in- 
come is effectively diffused through the surrounding agricultural area. 

It is not the purpose of the present discussion to point out spe- 
cifically how the ratio of resources to population can be increased, 
or even less, to argue that the ratio, in every case, can be effectively 
increased. The immediate discussion has a two-fold purpose. First, 
it is intended to show that real income per productive worker can 
be raised by an increase in the ratio of effectively used resources to 
population. Second, the position here is that since in the first place 
a reduction of population through birth control and migration is 
slow, only partially effective, and on many counts undesirable, and 
in the second place, since Tennessee has large undeveloped resources 
careful attention should be given to the formulation and execution 
of a program designed to increase the ratio of resources to popula- 
tion by more complete discovery and effective utilization of our re- 
sources. Specific suggestions for such a program are presented in 
the last two chapters of this work. 

*Dr. J. E. Hedges and Harold G. Murphy, Commerce and Industry, Citi- 
zens Fact Finding Committee of Georgia (December, 1939), pp. 7-8. 



In Chapter III it was argued that Tennessee should give more 
serious attention than is now being given to the formulation and 
execution of an industrial development program for the state. In 
that chapter two major reasons were advanced, namely, first, the 
need for greater industrialization in Tennessee to provide employ- 
ment and raise the per capita income level, and second, certain im- 
portant changes in the state and region which increase the necessity 
of deliberate efforts to develop and attract industry to the state. A 
third major reason why Tennessee should give more serious con- 
sideration to the problem of industrial development in the state in 
the future than it has in the past lies in the greatly increased efforts 
of competitive states to attract industries. 

The Council of State Governments reports that in 1939 ap- 
propriations for advertising and industrial development programs 
were made by 39 states. 1 The number of states making appropria- 
tions for such programs has increased rapidly in recent years. 

In 1933 six states were appropriating funds for advertising 
purposes. By trie end of the 1935 legislative sessions, seven more 
states had joined the ranks; with the addition of nineteen states 
by the end of 1937 sessions, a total of 32 states were competing 
through advertising media for tourists, industries, residents, in- 
vestors and markets for their agricultural products. 2 

In the 1939 sessions eight additional states joined the ranks, as 
Oklahoma abolished its program, bringing the total to 39 states. 
For the 1940 fiscal year these states appropriated approximately 
$3,000,000 for advertising. 

The aim of the programs differ from state to state, but these 
advertising and promotional programs have in general five main 

1. The development of the tourists' business 

2. The attraction of home owners 

3. The increase of markets for agricultural products 

4. Attraction of investors 

5. The expansion of industry. 

While in every case these state advertising and promotional programs 
were designed to increase tourist travel, it should be noted that 32 of 

^he Council of State Governments, Advertising by the States (March, 

2 lbid., p. 3. 


the 39 state programs had as their purpose the attraction of industry 
to the state. 

What accounts for the greatly increased efforts of the states to 
attract tourists and new industries and to increase the markets for 
their agricultural products? As the previous discussion shows, most 
of the increased activity appears to have come since 1933. Doubt- 
less some of the increase from 1933 to 1939 has been due to the re- 
vival of various programs discontinued in the economy move from 
1929 to 1933 as state revenues declined. But the inauguration of ad- 
vertising and promotional programs in most of the states has been 
hastened if not caused by the depression, according to a survey by the 
Council of State Governments. 1 The increase of unemployment and 
the decline of state revenues, associated with the declining volume 
of business during the depression, were important factors in the rapid 
extension of state campaigns aimed at increasing income through 
more industry and tourist trade and the improvement of markets for 
products. There were, however, other important factors. The mi- 
gration and decentralization of industry, the loss of foreign markets 
and the decline of important industries in particular regions, the 
development of new industries which use new types of raw materials 
such as the chemical industries including synthetic fibers, the exhaus- 
tion of resources in some areas and the discovery and greater availa- 
bility of raw materials in other areas, as well as the spirit of competi- 
tive emulation have played important roles in the rapid expansion of 
state industrial development programs. It is highly probable, also, that 
some programs have been accelerated by success stories of particular 
towns, small regions, and other states, in securing new industries 
through research, advertising, and promotional work. 

In the older industrial states threatened with a relative if not 
absolute decline of industry through the migration of particular in- 
dustries, the state programs have been aimed very largely at keep- 
ing and expanding existing industries. In those states in regions 
which show industrial gains relative to the nation as a whole, the 
state advertising and promotional programs appear to have been 
motivated largely by the desire to get as much as possible of the 
migrating or expanding industries while the movement is taking 
place. Other states, dependent largely upon agriculture and other 
types of raw material production, have adopted programs to raise 
income through the development of local industries and the attrac- 
tion of expanding or migrating industries. 

'Ibid., p. 3. 


These various programs for industrial development have been 
based on the fact that the actual location of a large volume of new 
industry is dependent upon the choice of industrialists between 
alternative locations in different states. For a number of plants, 
certainly in several types of industries, total per unit cost of pro- 
duction and marketing, as accurately as they can be estimated, are 
equal in a number of possible locations. In such cases the place 
of final location is sold to the industrialist. Even in the case of 
unique industrial locations the possibility of securing an industry 
for that location depends upon the accurate and detailed data on 
locational factors placed in the hands of the decision-making in- 
dustrialist. An industrialist cannot locate in the "best" location 
if he does not know about it. Industrial development programs 
have been set up in the several states for the purposes, first, of 
reducing the probability that prospective industrialists may overlook 
unique locations in these states and, second, in the case of equal 
cost advantage locations, of selling the industrialists a location in 
these states. Securing new industries for a state in a large number 
of instances is a competitive job of outselling neighboring states 
as witness the efforts of the states which have any chance to obtain 
the new plant any time the intention to build one is announced. 

In recent years several southern states have been setting up 
organizations and developing plans to make more effective their 
efforts to obtain new industries. In 1937 North Carolina reorgan- 
ized the Division of Commerce and Industry for the purpose of in- 
dustrial research and the promotion of industry in the state. An 
annual appropriation of $125,000 was made for two years, and in 
1939 an appropriation of $100,000 annually was made for two more 
years for advertising the state's industrial resources and advantages. 
Louisiana, in November, 1936, created a Department of Commerce 
and Industry and appropriated $50,000 per year in 1936 and 1937. 
In Georgia, The Citizens Fact Finding Committee and the privately 
sponsored Industrial Development Council have been active in re- 
search and promotion work. In 1940 Virginia received a grant of 
$90,000 from one of the foundations for industrial research looking 
toward the development of industry. Texas has set up a twelve-point 
program designed to increase the rate of industrial development. In 
1936 Mississippi started its BAWI (Balance Agriculture With In- 
dustry) program and in 1938 Arkansas set up the Arkansas Agricul- 
tural and Industrial Commission to encourage the development of 
new industries within the state. 1 

Mississippi's BAWI program ended June 1, 1940. '. v 


In view of the competitive scramble for new industries, the 
development of state-wide industrial development programs in other 
states becomes a powerful argument for an effective program in 
Tennessee. Because of this fact, in the rest of this chapter we 
examine briefly some of the programs in other states. It is not in- 
tended to present here a careful and detailed analysis of all the 
state industrial development programs. The reason for considering 
these programs at all is threefold. First, a knowledge of what is 
being done in other states is basic to a careful appraisal of the pro- 
gram in Tennessee. Second, a study of the programs in other 
states may suggest improvements in the present program in Tennes- 
see. Third, the industrial development work in competing states is 
a powerful argument for the formulation of a more effective pro- 
gram in Tennessee. In line with these purposes this discussion is 
purposely limited to a few representative programs. 

The discussion of the several state programs is organized under 
the following heads: 

1. Types of organization 

2. Activities and functions 

3. Results. 


Programs for industrial development in the several states range 
from those with highly unified, state-wide programs with large 
financial support to others which have largely a paper program. 
Likewise, the organizations for carrying out the programs for indus- 
trial development vary widely from one state to another. These 
agencies range all the way from state-wide chambers of commerce, 
citizens committees, and state planning boards, to divisions of the 
existing state departments, and independently organized state de- 
partments of commerce and industry. In general, the following 
more or less distinct types of organization exist with considerable 
variation from one state to another: 

1. A state-wide chamber of comerce 

2. Citizen's committees, serving without pay 

3. Boards, committees, councils, etc., consisting of government 
officials (heads of various departments) and private citizens. 

4. State planning boards or commissions, 

5. Some combination of the state planning board and one or 
more promotional agencies, 


6. A separate division created in an existing state department 
such as the department of conservation, or commerce and 
industry, or industry and agriculture, 

7. A separate department of commerce and industry created 
solely for the purpose of industrial development. 

In a number of the states different parts of the industrial pro- 
gram are carried on by different agencies. In Alabama, for example, 
the research and fact finding part of the program is performed by the 
state planning commission, several state departments, and co-operat- 
ing educational institutions; state advertising is carried on by the 
State Bureau of Publicity and Information in the Highway Depart- 
ment; and the promotional work, which itself involves considerable 
state advertising, by the state-wide chamber of commerce. State 
chambers of commerce or else chambers of commerce in key cities 
handle most of the industrial promotion work in many other states, 
for example, Florida, West Virginia, and Delaware. 

The majority of the state industrial development programs, how- 
ever, are headed by some citizen group of committees, boards, 
councils, or commissions appointed by the governor. These bodies 
are independent of other governmental agencies. The Connecticut 
Development Commission, organized in 1939, is rather typical. "It is 
composed of eleven private citizens, representing the various business 
and economic interests of the state, and including at least one rep- 
resentative from each county, one representative of labor and one 
representative of agriculture. There are no public officials on the 
Commission, which is an independent agency." 1 The Kansas In- 
dustrial Development Commission, established in the same year, is 
likewise an independent, non-partisan agency "composed of nine 
private citizens appointed by the governor to represent the social, 
economic and geographic composition of the state." 2 Similarly, the 
industrial development programs in Illinois, Arkansas, Minnesota, 
Ohio and Rhode Island, are headed by councils, boards, commissions, 
etc., varying from six to 24 private citizens. The Illinois Develop- 
ment Council, formed in 1939, consists of 24 private citizens rep 
resenting economic and business groups throughout the state. The 
Arkansas Agricultural and Industrial Commission is composed of 
seven private citizens, one of whom is executive director; the Minne- 
sota Resources Board has 12 members; Ohio, six; and the Rhode 
Island Industrial Commission, seven. In all cases, these non-partisan 
boards representing the various social, business, and economic groups 

Advertising by the States, op. cit., p. 11. 
2 lbid., p. 14. 


and geographic sections of the state are independent of any depart- 
ments of the state government. 

A slight variation of the above is found in at least two states 
where the industrial development council is composed of private 
citizens plus the heads of various related state departments. The 
Massachusetts Development and Industrial Commission consists of 
five private citizens appointed by the Governor plus the Commis- 
sioner of Labor and Industries and the Commissioner of Agriculture. 
The New Jersey Council, the state development and promotional 
organization, is composed of the heads of 20 state-wide organizations 
and departments of the State Government. In addition there is 
an advisory board consisting of seven other heads of the state-wide 
organizations and state Departments plus the Governor. The New 
Jersey plan calls for the formation in each community of a local 
industrial development committee representing labor, management, 
government, finance, education and civic life. 

As far as the author has been able to learn, the program of in- 
dustrial development is handled directly, or even largely, by the 
state planning commission in only one state, namely, Colorado. 
In several states, however, this agency cooperates in furnishing 
information and clerical assistance to the agency for industrial devel- 
opment. In New Hampshire the work generally performed by a 
state planning board and an industrial development agency are com- 
bined in the State Planning and Development Commission. 

At least four states have established separate divisions or depart- 
ments of commerce and industry for the sole purpose of industrial 
development. In 1939, Pennsylvania established the Department of 
Commerce as an independent agency "to promote industry, expand 
markets, encourage tourist travel, and prepare a planning program for 
Pennsylvania." 1 Indiana, likewise, has established a Department 
of Commerce and Industry to promote industrial development. 
Louisiana is a third state which has created a separate department 
for industrial development. The Department of Commerce and 
Industry, an independent agency composed of 12 members serving 
without pay, plus the Governor, was established by popular vote in 
1936 to promote industrial and commercial welfare of the state, and 
especially to attract new industries. The General Assembly in North 
Carolina, in 1937, reorganized the Division of Commerce and Indus- 
try because of, "first, the pressing need for an agency equipped to 
service industrial inquiries and to work with the various towns, cities 
and the public utilities in locating new industries in the state; and, 

'Ibid., p. 25. 


second, the decision- of the state to launch an advertising program, 
one important phase of which was to be the promotion of North 
Carolina as an outstanding state for industrial development. m 

The organization for industrial development most frequently 
employed by the several states is a non-partisan council of private 
citizens representing the social, economic, business, and geographic 
interests of the state. When this type of organization exists, the 
work of the council consists of the formulation of policies, the plan- 
ning of the broad outlines of the industrial development program, 
coordinating the work of existing agencies, and selling the program 
to the citizens of the state. The technical work of research, promo- 
tion and advertising under this type of organization is generally done 
partly by a technical staff located at the state capital, but largely by 
cooperating public and private research and promotion agencies and 
local groups in the state. 

Detailed discussion of the industrial development programs of 
particular states is beyond the scope of this short study, but a brief 
examination of the more common activities under these programs in 
various states is presented here. With considerable variation from 
program to program, the several state industrial development pro- 
grams include the following activities: 
I. Research and fact finding 
II. Advertising 

III. Promotion 

IV. Public education 

V. Statement of industrial policy. 

Not all of these activities are included in every state indus- 
trial development program, and, even in the case of the activities 
which are included, the emphasis differs from one program to an- 
other. Let us examine some of the specific activities under these 
broad functions of a few of the representative state industrial 
development programs. 

The collection and analysis of detailed data on resources, in- 
dustries and industrial opportunities in the state is basic to every 
one of the state programs. For example, the "collection of indus- 
trial data and their preparation in factual form to present to pro- 

^Seventh Bienniel Report of the Department of Conservation and Develop- 
ment, North Carolina (1938), p. 34. 


spective industrialists is one of the most important jobs" of the 
Division of Commerce and Industry of North Carolina. In co- 
operation with the State Engineering Experiment Station at the 
Georgia School of Technology, the Industrial Development Council 
of Georgia, a privately financed organization, is conducting re- 
search to determine the types of industries which have particular 
advantages in the Southeast, after which they propose to "develop 
detailed economic and technological prospectuses establishing a sound 
background for the use of individuals and groups contemplating the 
establishment of plants of that particular type. m In Virginia, a grant 
of $90,000 has been given to the Institute of Industrial Research, 
the Planning Commission of Virginia, and the Virginia Polytechnic 
Institute for research on resources, industry and labor which is con- 
sidered basic to a program of industrial development. 

The Kansas Industrial Development Commission, created "by 
act of the legislature of 1939 as a non-partisan body for 'fostering and 
promoting the industrial development and economic welfare of the 
state,' " and provided with an appropriation of $60,000 per year for 
the first two years, was definitely charged with the duty of "collecting 
all pertinent information available regarding the industrial opportun- 
ities and possibilities of the state of Kansas, including raw materials, 
and products that may be produced therefrom; power and water re- 
sources; transportation facilities; the available markets, and the mar- 
keting limitations of the state; the availability of labor; the banking 
and financing facilities; the availability of industrial sites; and the 
advantages of the state as a whole, and the particular sections thereof, 
as industrial locations, and such other fields of research and study as 
the commission may deem necessary." 2 As another example of a 
specialized kind of research, the Connecticut Development Commis- 
sion is compiling and maintaining a file of idle industrial plant fa- 
cilities and available industrial sites. Similar work is being done by 
the New Jersey Council. 

In addition to the collection of data on resources and other 
locational factors, most industrial development programs provide for 
research on the present industrial structure of the state. The 
Industrial Development Committee of the New England Council 
collects data on existing industrial structure in order to: 

1. Determine wherein it is strong and weak. Examine it for 
too many industries of like nature, and industries subject to 
heavy seasonal fluctuations or prolonged slack seasons. 

x Letter to the author from Joseph B. Hosmer, April 15. 1940. 
2 From the Act creating the Commission. 


2. Determine what industries are needed or desirable as auxil- 
iaries of, or suppliers to, present industries. 

3. Determine what new industries are developing that can op- 
erate successfully in the community, considering the advan- 
tages as determined by the survey mentioned. 1 

In Virginia, the Institute of Industrial Research is carrying on 
investigations to determine what industries would best fit in with 
a desirable industrial pattern. As pointed out above, in Georgia, 
the Industrial Development Council, through the State Engineer- 
ing Experiment Station at the Georgia School of Technology, is 
pursuing "detailed economic and technologicar research in those 
industries which might locate in Georgia with the view of compiling 
prospectuses for the benefit of industrialists "contemplating the 
establishment of plants of that particular type." 2 

Several of the states, for example, Connecticut, New Jersey, 
and Arkansas, are conducting research on state and local taxes, laws 
and regulations to discover what factors, if any, are likely to pre- 
vent (a) the profitable operation and growth of present manu- 
facturing establishments, and (b) the state and communities from 
securing new industries. 


Research is necessary to provide the detailed data on the loca- 
tional factors to be considered by an industrialist in choosing a loca- 
tion, but advertising and promotion are essential to contact the 
industrialist and sell him on a location in the state. Consequently, 
most of the state programs for industrial development provide appro- 
priations for advertising and promotion. 

Through the State Advertising Program with an appropriation 
of $125,000 per year for the 1937-1939 biennium and $100,000 per 
year for the 1940-1941 biennium in cooperation with the Depart- 
ment of Conservation and Development, North Carolina has been 
carrying on an advertising campaign in a group of "national maga- 
zines with a high executive readership" and having "a circulation 
per issue of 3,500,000" aimed at the expansion of industry to 
utilize the state's raw materials. 3 Pennsylvania is conducting an 
advertising program aimed at influencing new industry to locate 
in the state. As further examples, the New Jersey Council is 

'New England Community Statistical Abstracts. Bureau of Business Re- 
search, Boston University, College of Business Administration, October, 1939. 

2 Letter to the author, April 15, 1940, by Joseph B. Hosmer, industrial 
economist in charge of the work at the Georgia School of Technology. 

3 Seventh Biennial Report, Of. cit., p. 135. 


spending $100,000 a year for advertising, while for the two years 
ending June 30, 1941, Illinois is spending $250,000 for publicity 
and promotion. 


Through advertising, through personal contacts and through 
the help of public utilities, chambers of commerce and other or- 
ganizations, the various states build up a list of industrial prospects 
which they attempt to locate in the state. Other states contact 
directly manufacturing concerns which are contemplating expan- 
sion or migration and try to induce them to locate the new plants 
within their borders. 

Once a request for information is obtained from an industrial 
prospect in response to the advertising program or other means, 
most of the state industrial development programs are prepared to 
provide detailed information on locational factors quickly rather 
than let the prospect go elsewhere because his initial inquiry goes 
unnoticed on the desk of some state agency unprepared to give any 
adequate answer. 

The direct promotional work under the North Carolina pro- 
gram has been described as follows: 

One of the most important phases of industrial promotion is 
the extensive follow-up of all inquiries made by the Division. In 
addition to supplying all available information requested, the 
Division makes a special point of servicing the inquiry with ad- 
ditional data as often as it is thought advisable to do so. This 
procedure has resulted in interesting some firms in North Caro- 
lina that originally expressed no desire to move to the State. 

If it is at all possible, after a prospect has manifested a de- 
sire to know about the State, a personal visit is made at his office. 
Although the time for such calls is limited, a number have been 
made with very satisfactory results. The Division has been for- 
tunate in bein gable to call upon representatives of the utilities- 
railroads and power companies— to make a number of these per- 
sonal calls. 1 

North Carolina also employs an industrial agent to follow up 
leads and induce new industries to come to the state as well as 
"dissuade any present industries within the state from moving 


In a number of states the industrial development programs 
include educational campaigns to acquaint the public with the 

Hhid., p. 36. 


specific industries in the state, to show the importance of industry 
to the welfare of the state in terms of employment and income, to 
create a more favorable attitude toward industry, and to encourage 
cooperation between the industries and the people of the state. By 
making voters, legislators and governmental officials aware of the 
economic benefits of industry, these public education programs 
seek to secure and maintain controllable conditions favorable for 
the location and growth of industry. 

Some of the older industrial states in particular, such as, Penn- 
sylvania and Massachusetts, attempting to maintain their position 
in the face of the growth of newer industrial areas, carry on ad- 
vertising and educational programs designed to "acquaint the manu- 
facturers within the state of the advantages they enjoy." In ad- 
dition to this, a number of the states, such as, Pennsylvania, Mass- 
achusetts, Kansas and North Carolina, provide various services 
for manufacturers already within the state aimed at making them 
more successful and eliminating difficulties and troubles which may 
cause them to move away. These services generally take the form 
of information supplied by the industrial development research 
agency, public institutes and clinics for industry, particularly those 
in difficulty or in danger of leaving the state. A major part of the 
work under many of the industrial development programs is 
directed toward the maintenance and growth of existing industries. 
As the Industrial Development Committee of the New England 
Council points out: 

The maintenance of present industries is the major part of 
any local industrial program. It is futile to try to secure new in- 
dustries if local conditions are unfavorable to the growth and ex- 
pansion of present establishments. The committee should hold a 
joint meeting with representatives of all local industries as a means 

1. Ascentaining what, if any, factor in the community or 
state are obstacles to the profitable operation and growth 
of present manufacturing establishments. 

2. Determining what factors, in the opinion of present local 
industrialists, may militate against securing new indus- 
tries 1 

Finally, one purpose of the public education aspect of industrial 
development programs is to secure public support of the programs 
by pointing out the economic benefits to be derived from new 

Wew England Community Statistical Abstracts. Bureau of Business Re- 
search, Boston University, College of Business Administration (October, 
1939) p. 8. 



It hardly appears essential to the discussion to indicate the 
types of policies adopted or the states which have adopted them. 
It is enough to point out that, almost without exception, those 
states which have set up an industrial development program have 
given considerable attention to the problem of a desirable indus- 
trial pattern and to the formulation of industrial policies believed 
essential in moving toward that pattern. Certainly the process of 
thinking the problem through to determine what constitutes a de- 
sirable industrial pattern, the setting of objectives, and the careful 
consideration of public policies to achieve those objectives, appears 
to be a distinct gain as compared with leaving industrial develop- 
ment to chance efforts on the part of competitive groups. 


Since North Carolina has one of the most complete and ac- 
tive industrial development programs in the South, let us look 
briefly at the set up there to see how these various activities are 
tied together. In 1937 the General Assembly reorganized the 
Division of Commerce and Industry into an active agency for re- 
search and the promotion of industry within the state. According 
to the report of the Division: 

Two factors were responsible for the reorganization of this 
division into an active departmental agency: first, the pressing 
need for an agency equipped to service industrial inquiries and 
to work with the various towns, cities and the public utilities 
in location of new industries in the state; and, second, the decision 
of the state to launch an advertising program, one important phase 
of which was to be the promotion of North Carolina as an out- 
standing State for industrial development. 1 

According to this same report: 

The work of the Division of Commerce and Industry may be 
divided into three distinct phases; the preparation of industrial data 
pertaining to specific localities found to be suitable for certain types 
of manufacture, the development of prospects who might be in- 
terested in the advantages of these localities, and actual personal 
efforts to locate the prospect in North Carolina. 2 

The preparation of industrial data is described briefly as follows: 

The collection of industrial data and their preparation in 
factual form to present to industrial prospects is one of the most im- 
portant jobs of the Division. The amount of detail work required 
to supply a prospect with adequate information to present a com- 

1 Seventh Biennial Report of The Department of Conservation and De- 
velopment of the State of North Carolina. Biennium ending June 30, 
1938, p. 34. 

2 lhid. 


plete picture of the locality under consideration is frequently a large 
task. It involves in some cases vacant building specification, 
equipment, financing, etc., and in others new construction. In all 
cases there are such details as transportation facilities, power and 
rates, taxes, labor supply, water, raw materials, and markets, 
to be considered. 1 

The Division has, with the aid of cities, towns, utilities, and 
chambers of commerce, been able to obtain a list of vacant manu- 
facturing properties in the state that are available for new enter- 
prise. In many cases maps, drawings, and other necessary items 
have been collected and placed on file. A number of outstanding 
industrial sites now developed have been surveyed and all data 
concerning these sites placed on record. Efforts have been made 
to determine the amount of financial aid various towns and cities 
could lend to new industrial enterprises that might desire to locate 
there. 2 

The advertising program, for which an appropriation was made 
of $125,000 per year for the 1937-39 biennium, and $100,000 per 
year for the 1939-41 biennium, is handled by a special Advertising 
Committee in cooperation with the Department of Conservation and 
Development. The primary objectives of this advertising are: (1) 
the development of tourist business; (2) the expansion of industry 
to utilize the raw materials of the state; and (3) the attraction of 
homeseekers. Through the advertising program "the industrial advan- 
tages of North Carolina have been presented, not only in General 
Magazines, but through industrial Trade Magazines, carrying a 
special message to the executives of specialized industries." 3 The 
group of "national magazines with high executive readership" has a 
"circulation per issue of 3,500,000."* 

In addition to inquiries coming to the Division from the 
advertising program, industrial prospects are secured in a number 
of other ways, such as, "personal contacts" and through "public 
utilities, chambers of commerce and others." 

Requests for general industrial information are answered prompt- 
ly by sending general published data, and this is always followed up 
later by specific data designed to fit the exact needs of the prospect. 

As the Division report points out: 

One of the most important phases of industrial promotion is 
the extensive follow-up of all inquiries made by the Division. In 
addition to supplying all available information requested, the 
Division makes a special point of servicing the inquiry with addi- 
tional data as often as it is thought advisable to do so. This pro- 
cedure has resulted in interesting some firms in North Carolina 
that originally expressed no desire to move to the State. 5 


pp. 34-35. 

2 lbid., 

p. 35. 


p. 136. 


pp. 136-137. 

5 Ibid., 

p. 35. 


Where it is possible to do so the Industrial Engineer or some 
representative makes a personal call on the industrial prospect to 
provide him with more detailed data and to learn more about 
his own needs. 

In locating the prospect in North Carolina: 

The Division has followed a policy here that seems to be 
very effective— that of having the prospect himself, or his represen- 
tative come to the State to look over the various available sites and 
buildings. In addition to giving the prospect a better idea of what 
North Carolina has to offer, this procedure also gives the various 
towns and cities to which the prospect is taken the opportunity to 
know the man with whom they may deal, and to understand better 
his requirements. 1 

Although the Division does supply detailed information about 
the state and various locations, it does not attempt to make any final 
decision as to where a prospect should locate. This is left for the 
prospect to decide. In this connection, however, prospects who are 
made known by utilities are supplied with information about sites 
and locations in the areas served by these utilities. Such a policy 
must be followed, as the prospect was developed by some private 
agency interested in the industrial growth in its own section, un- 
less investigations prove the territory served by the utility is 
for some reason not suitable and the utility releases the Division. 
In such cases the Division is free to show other sections." 

Obviously, many details of the program cannot be considered 
in this limited space. 


What about concrete results from these various state programs? 
Accurate measurement of results it almost impossible; hence, this 
question can be answered only in terms of the claims of the various 
agencies. While recognizing the possible errors in the figures, let us 
look at some of the reported results. 

The Department of Commerce of the Commonwealth of Penn- 
sylvania established in June, 1939, "to promote business and industry 
within the state" and "to encourage the location of new businesses" 
claimed the following results of the first eighteen months of its 
work : 

1. More than 350 new industries were established in Pennsylvania 
from January 1, 1939, to November 1, 1940, providing employment 
for more than 30,000. 

2. Industrial migration from the state was almost completely 

3. Industrial and utility construction started or scheduled in 
Pennsvlvania in 1939 exceeded $200,000,000— a figure larger than 
for anv other state. 3 

'Ibid., p. 36. 

2 lbid. 

business Week, March 15, 1941, p. 30. 


The New Jersey Council reported the following results of the 
first year's advertising: 

1. 1,348 new industries started operations in New Jersey in 1938 
as against 1,250 in 1937. 

2. 6,480,000 advertising messages featuring the economic ad- 
vantages of New Jersey for plant location were placed before 
the major business executives of the Country. 

3. Thousands of dollars worth of publicity on New Jersey as a 

favorable place for plant location was secured (space that can- 
not be bought). 

4. Greatly increased industrial development effort on the part 
part of railroads, utilities, county and municipal industrial 
commissions and local Chambers of Commerce and Real 
Estate interests. 

5. Greater appreciation on the part of New Jersey's citizens 
as to the importance of industry to New Jersey. 1 

The Division of Commerce and Industry of North Carolina 
reported the establishment of 85 new concerns and additional 
capital for 52 existing ones involving a total of $7,000,000 new 
capital during the first eight months of 1938. During 1940, the 
Division claimed 61 new industries plus 91 additions to old in- 
dustries. The 1940 figures add up to a total of, roughly, $10,000,- 
000 of industrial construction contracts, 10,000 new employees and 
an addition of $8,500,000 to the annual payroll. 2 

Recent results are not available, but the Department of Com- 
merce and Industry of Louisiana claims that in the two years from 
1937 to 1939 its activities were instrumental in bringing to the 
state 225 new industrial establishments, with $50,000,000 in new 
capital and jobs for 20,000 persons. Through December, 1939, 
Mississippi claims an increase, under its program, of 3,000 jobs 
and $2,000,000 in annual payrolls. 

The important fact is that many of the states, particularly 
southern states, have integrated state-wide programs under the 
direction of some central unifying agency provided with appreci- 
able appropriations for developing industrial resources and attract- 
ing new industries to the state. If one remembers that a large part 
of new industry may choose between equal cost advantage locations 
in different states, the operation of state-wide programs for in- 
dustrial development in competitive states is a powerful argument 
for careful examination and appraisal of the existing program for 
industrial development in Tennessee. 

^The New Jersey Council, More Jobs For New Jersey. 
"Business Week, March 15, 1941, p. 32. 




In contrast with such centralized and integrated state-wide 
programs of industrial development in competing states as were 
examined in the preceding chapter, in Tennessee there is no 
single state department or state-wide agency set up and financed 
for the primary purpose of promoting industrial development in 
the state. Instead, the following public and private agencies are 
working more or less independently, and even in some cases com- 
petitively, on various aspects of industrial development either for 
the state as a whole or for particular localities: 

1. The Tennessee Department of Conservation 

2. The Tennessee Division of Geology 

3. The Tennessee State Planning Commission 

4. The Tennessee Valley Authority 

5. The University of Tennessee 

6. Chambers of commerce 

7. Industrial committees, business groups and civic clubs in 
small towns 

8. Railroads 

9. Private power companies. 

In the following pages we examine very briefly the principal 
activities of these several organizations which are directed toward 
industrial development in the state, primarily for the purpose of 
comparing the present program in Tennessee with programs in 
other states. 


Outside of the activities of the Division of Geology, the 
Tennessee Department of Conservation carries on but little work 
which is aimed directly at promoting industrial development in 
Tennessee. For the four years ending July 1, 1941, the Division 
of Information in the Department of Conservation has received 
$100,000 per year for advertising and publicity; but, consistent 
with the purpose for which this Division was created, these funds 
have been used primarily to attract tourists, and only to a minor 
extent to attract industry to the state. There is at present no or- 
ganized program or available funds for advertising the state's 


resources and industrial advantages. The Commissioner of Con- 
servation and the personnel of the various divisions in the De- 
partment of Conservation are doing what they can within the 
limits of their present budget and personnel and are cooperating 
as far as possible with individual groups, chambers of commerce 
and the Tennessee Conference Board in their individual industrial 
development work. As the various divisions are now organized and 
restricted by lack of funds there is little opportunity for effective 
industrial development work in the Department of Conservation, 
except in the Division of Geology. 


The most extensive work on industrial development carried 
on by any of the branches of the state government is that in the 
Division of Geology. According to Dr. Walter F. Pond, State 
Geologist, research or activities in the field of industrial develop- 
ment is divided into three major fields as follows: 

1. Geological and mineral work 

2. Work on water resources 

3. Mapping. 

The scope and purpose of this discussion does not permit detailed 
consideration of the specific activities under each division, but let 
us examine some of the representative types of work under each 
of these major fields of activity. 1 

The chief work of the Division in the geological and mineral 
field consists of the following: 

1. Pure geological research 

This basic research provides "the background with which 
the economic or mineral geologist may study mineral deposits, 
determine their associations, mode of occurence, and rocks in 
which they are most apt to be found and then show on his maps 
where to look for new deposits, and draw up rules for prospecting 
so new deposits may be found with the least effort and cost" 

2. The analysis of "samples of the bits of ground up rock or 
'cuttings' from wells drilled for oil or water" 

Dr. Pond points out: "In this way a log of the well will show the 
thickness of each formation, giving definite knowledge of the sub- 
surface geology rather than inferences from distant croppings" 

3. Analysis of minerals, such as, coal, clays, phosphate rock, mang- 
anese, shales and clays, etc. For example: 

2 The industrial development work of the Division of Geology has been 
carefully described by Dr. Pond in his report in The Natural Resources of 
Tennessee published by the Tennessee Department of Conservation in 1939. 
The reader is referred to that source for a more complete description of the 
work of the Division. All quotations concerning the work of the Division 
are from this work. 


For four years the Division has been making field and lab- 
oratory examinations of the clays and shales and a great mass of 
data is available. Comparatively little extra work and the funds 
to publish the long detailed report will pufi us in a stronger posi- 
tion to attract this industry. 

4. Publication of the technical pamphlets reporting the results 
of research on particular resources and, in addition, the Division has 
published a Summary of Mineral Resources of Tennessee. 

5. Analysis service. 

According to Dr. Pond, "seven or eight hundred samples of 
rocks and minerals are sent the State Geologist each year for iden- 
tification and a report as to value." As a supplement to the analysis 
service: "Advice is also given as to further prospecting and the 
names of companies which might be interested in buying or min- 
ing the material." 

The work of the Division on water resources has been carried 
on "in co-operation with other agencies, mostly Federal." In re- 
cent years "the Tennessee Valley Authority has been a heavy 
contributor to the joint pool for the surface water studies, their 
funds being used in the Valley only, and the individuals and com- 
panies have dropped out of the picture." The water resources 
studies involve analysis and measurement of flow of both surface 
and underground waters for commercial and industrial uses. 

Mapping is the third major type of work of the division. 
According to Dr. Pond, "The best map for all purposes and the 
most accurate is the topographic map," which, "not only shows 
distances in two dimensions but also shows the third dimension 
of height." 

These maps are used to lay out highways so as to get the road 
through with the least number of hills, by railroads in the same 
way, and for river development, for, since the shape of the hills 
is shown, it is possible to select a dam-site in the office and tell 
how large the reservoir will be and how much water it will hold. 

In order to provide the basic detailed data on resources in 
Tennessee required for an effective industrial development pro- 
gram the work of the Division of Geology should be increased. 
To cite only a few needs: 

1. Funds are needed to keep up to date the analysis of bor- 
ings from oil wells. According to Dr. Pond, "ten or 
fifteen geologists from industries come to the office every 
week for information, and if it is not available they will 
probably go to other states." 

2. Funds are needed for a more careful analysis of the large 


deposits of high-grade limestone in Middle and East 

3. A more careful study of the exact quality, quantity, and 
location of clays and sands in West Tennessee is neces- 
sary before new industries can be induced to develop 
them on any large scale 

4. Funds are needed for a long-range study of coal deposits 
in the state 

5. Because of the lack of a laboratory and a full-time chem- 
ist, the analysis of samples sent to the Division of Geol- 
ogy is greatly delayed 

6. Additional funds are needed for the completion of topo- 
graphic maps for the remaining areas of the state 

7. Several technical studies already completed and others 
which need bringing up to date cannot be published for 
lack of funds. 

There are other limitations to the amount of research essen- 
tial to an industrial development program in Tennessee which 
the Division of Geology with its present budget is able to perform, 
but the ones listed above certainly suggest the need for the ex- 
pansion of the work of the Division. 


The Tennessee State Planning Commission, because it has 
been concerned primarily with other problems, has done less 
than those within the organization had hoped to do to promote 
industrial development in the state. In 1937-38 the Commission 
planned a survey of the state's industrial resources and industrial 
growth preliminary to a program of industrial development, but 
due to lack of competent personnel for this special job and the 
pressure of other duties, the plan was abandoned. Food mer- 
chandising surveys were conducted in Memphis and Nashville in 
1938 to discover possible products sold in these cities which might 
be produced in Tennessee. A number of requests for informa- 
tion are received by the Commission from prospective indus- 
trialists and other such requests are referred to the Commission 
by various state agencies merely because of the absence of any 
central agency to handle such requests. The Commission at 
present is poorly equipped to service these requests. In many in- 
stances accurate detailed information is not available and funds 
are not adequate to permit the collection of such data. Hence, 


it can give only general and incomplete replies based on such 
information as happens to be available in its files or such in- 
formation as it can obtain hurriedly from other agencies, such as 
the Division of Geology, the Tennessee Valley Authority, the 
University of Tennessee, and others. The lack of detailed industrial 
information in the Commission's files, through no fault of its own, 
plus the pressure of other work, frequently results in considerable 
delay in providing incomplete replies to requests for information 
from prospective industrialists. 


As an important part of its services to the state, the University 
of Tennessee is carrying on a two-fold program aimed at raising the 
real income of the people of the state. First, through various re- 
search, student teaching, and adult education programs information 
is made available which is designed to enable the people to make 
more efficient use of the money income they do obtain. Second, 
through research, teaching, and public information considerable 
effort is expended for the purpose of increasing the mony income of 
the people by the discovery, development, and more efficient use of 
the state's resources. 

A detailed description of the work of the various departments 
of the University in each of these two major fields is beyond the 
scope of this work. Simply as an indication of the nature of the 
efforts to raise income through the development of industry and the 
more efficient use of resources a few illustrative examples of the 
work at the University are presented here. 

1. The agricultural research and extension services are de- 
signed to increase agricultural income through the more 
efficient use of the land. 

2. Industrial research for the purpose of developing new prod- 
ucts and the more efficient use of resources is being carried 
on. A few outstanding results of this type of research are: 

(a) The development, in co-operation with the Tennessee 
Valley Authority, of a new and improved quick-freez- 
ing process for preserving foods. This process was 
placed in commercial use in 1940 in Cleveland, Ten- 

(b) New equipment and improved methods of processing 
cottonseed which greatly decrease the cost of process- 
ing and increase the amount of oil recovered from 


a ton of seed. Released through the University of 
Tennessee Research Corporation, a non-profit organ- 
ization, this process is in use in a number of mills in 
the southern states. 

(c) The development of a process for producing a black 
plastic of light weight from cottonseed hulls, a very 
cheap and little used raw material. This plastic which 
may be used for telephones, pieces of electrical appli- 
ances, ash trays, fountain pens, steering wheels for 
automobiles, etc., is now being used satisfactorily by 
a Knoxville firm in the manufacture of sheaves for 

(d) The development of an apparatus which greatly 
increases the accuracy and speed of grading cotton 

3. Examples of economic and business research. 

(a) In a number of instances the University has collected 
and analyzed business and economic data for various 
agencies concerned with industrial development in 

(b) Studies of the effect of taxation upon industry in the 
state have been prepared. 

(c) A study of the milk industry in East Tennessee 
is now in process. 

(d) This very study, growing out of the Conference on 
Commercial and Industrial Development of Tennessee 
and the South sponsored by the School of Business 
Administration in 1939, is simply another example 

of the efforts of the University to promote indus- 
trial development in the state. 

The above are only a few illustrations of the work of the Uni- 
versity to develop industry in Tennessee. The broad activities of 
the University in this field may be grouped under: (1) training 
of students for industrial and commercial positions, (2) technical 
advice on industrial problems, (3) industrial and commercial re- 
search, and (4) public information. 

At present the University program is severely limited by lack of 
funds for commercial and industrial research. The scope and effec- 
tiveness of the University's program for industrial development in 
Tennessee could be greatly increased by funds which could be used 
for research fellowships for work on special problems, and funds 


which could be used to release part or full time various specialists 
for purposes of consultation and research on some of the more press- 
ing problems in this field. 


The TVA Act empowers the Authority to promote navigation, 
flood control, and utilization of surplus power; to conduct experi- 
ments in manufacture of phosphate fertilizer and in other activities 
related to soil conservation; to promote a wider and better use of 
electric power by local industries; and to conduct studies and pre- 
pare plans for use by Congress and the states in connection with the 
proper use, conservation, and development of the natural resources 
of the region. 

All these provisions have a relationship to a major purpose of 
the Act which, as stated in the preamble, is "to provide for the ag- 
ricultural and industrial development of the Tennessee Valley." 

The stimulation and widening of economic opportunity in the 
region is therefore an important concern of the Authority. 

The Authority contributes to the growth of industry and com- 
merce in two major ways: 

1. The programs of improved water transportation, low-priced 
electric power, and soil and forest conservation are laying founda- 
tions for the industrial and economic growth of the region. De- 
tailed information about these facilities and their uses is provided 
the people of the Valley. 

2. Technical research programs and industrial and economic 
studies of the Authority help open up economic opportunities for 
industry, agriculture and other occupations in the region. 

Some of the more important activities of the Authority which 
contribute to the growth of industry and commerce are indicated 

1. Utilization of the improved Tennessee River— In addition 
to the program of channel improvement and navigation facilities, 
the Authority has made studies of public-use terminal facilities 
available to industry and the public for the information of river 
communities interested in development of such terminals. 

The Authority has also conducted a survey of some 3,700 in- 
dustrial and commercial shippers and receivers of freight in the 
Tennessee Valley and adjacent areas for the purpose of determining 


the approximate volume and types of traffic which might move over 
the river after completion of the nine-foot channel in 1945. This in- 
formation will be used to assist communities along the river in 
the planning and construction of general-use terminal facilities 
and to furnish information of value to shippers who are planning 
to use the river. 

2. Utilization of electric power— The production of low-cost 
electricity in large amounts has been of service to many types of 
large and small industry, including concerns making phosphates, 
aluminum, and other electro-metallurgical products which are heavy 
users of electric power. In addition, electric power extension in- 
to rural areas is proving useful to small industries and service 
shops there. The availability of substantial amounts of low-cost 
power in the Tennessee Valley is proving particularly valuable in 
view of necessary expansion of national defense industries. 

3. Technical research program— In connection with soil con- 
servation objectives, research on agricultural processing industries 
and on farm equipment is conducted by the Authority in co-opera- 
tion with engineering and agricultural experiment stations and 
extension services of the land-grant colleges in the Tennessee 
Valley states. 

This co-operative policy of research has been adopted because 
it avoids duplication and by joint effort and pooling of knowledge 
and facilities, makes it possible to undertake a greater number of 
the many research projects needed in the region; as a further 
effect, this "grass-roots" policy of inviting local participation is 
resulting in local institutions assuming greater leadership in the 
conduct of such needed research. Some of these co-operative 
research projects are as follows: 

a. New immersion process and equipment for the individ- 
ual quick-freezing of fruits and vegetables have been developed 
in co-operation with the University of Tennessee Engineering Ex- 
periment Station, and tested in an experimental plant on a semi- 
commercial scale. The quick-freezing process and equipment were 
placed in commercial use in 1940 by a farm cooperative at Cleve- 
land, Tennessee. 

b. Improved equipment and methods of processing cottonseed 
have been developed in co-operation with the University of Tennes- 
see Engineering Experiment Station, and tested on a cottonseed 
pilot plant at the station. The improved cottonseed cooker result- 


ing from the research is in use in 26 installations in 13 mills in six 
Southern states 1 

c. Other major agricultural processing research is being con- 
ducted on growing and cost-saving processing of flax to produce fiber 
that can be spun and woven on cotton mill machinery. This 
project is conducted in co-operation with the Georgia Agricultural 
and Engineering Experiment Stations. The flax processing re- 
search has developed effective laboratory equipment that is now 
being tested on a larger scale in a pilot plant constructed at the 
Engineering Experiment Station. 

d. Research is in progress on new uses and improved methods 
of utilizing wood and other forest products, a major resource of 
the Valley, in co-operation with engineering and agricultural ex- 
periment stations in the Valley and with the U. S. Forest Products 
Laboratory and the Bureau of Chemistry and Agricultural Engi- 
neering of the U. S. Department of Agriculture. 

e. Research on low-cost farm equipment adapted to Valley 
conditions has resulted in development of a rural community re- 
frigerator in co-operation with the University of Tennessee Engi- 
neering Station and of a barn hay dryer in co-operation with the 
University of Tennessee Agricultural Experiment Station, and also 
of a contour furrow seeder for planting winter grain on hillsides, a 
thresher for small acreages, electrically heated sweet potato houses, 
farm irrigation systems, and others. These developments have been 
tested in rural areas in Valley states in co-operation with the agri- 
cultural extension services. 

It should also be pointed out that the rural electrification pro- 
gram of the Authority conducted in co-operation with the State Ag- 
ricultural Extension Service has brought about a large increase in 

x The success of this project is an example of the value of co-operative 
engineering research. The project was initiated at the University of Ten- 
nessee in 1929, as a result of a contribution by the Tri-State Cottonseed Oil 
Mill Superintendents Association. A few years later the Engineering Foun- 
dation, at the request of the Research Committee of the American Society of 
National Cottonseed Products Association and local oil milks. Of late, research 
the same time the TVA became jointly interested in the work and helped 
to build a pilot plant in which was installed machinery contributed by the 
National Cottonseed Products Association and local mills. Of late, research 
on a small commercial scale is being carried on by the University of Ten- 
nessee Experiment Station and a University of Tennessee Research Corporation 
has been set up to license and control the use of the process. Here then, we 
have a state institution of learning working with a federal government agency, 
a professional society, a trade association, and private capital all working to- 
gether for a common purpose now by the upbuilding of regional agricultural 


the farm use of electric equipment and appliances, such as lights, 
water systems, refrigerators, small motors, etc., and industry is find- 
ing substantial sales in this new rural market. While practically all 
of this equipment is being furnished by manufacturers located in 
the North and in other regions, since the Tennessee Valley has 
little or no manufacturing of this kind, a number of small com- 
panies have begun the manufacture of farm electrical equipment in 
the Valley area in recent years. Their products include churns, farm 
water systems, and meat-aging cabinets. Other new concerns are 
making electric room heaters and hot water heaters. 

4. Surveys and experiments on mineral resources— Field sur- 
veys, laboratory tests and research on mineral deposits are made to 
determine their character, extent, and probable commercial use. 
This research is done in co-operation with state geology divisions 
and the U. S. Geological Survey. The purpose is to find new and 
wider uses made possible by low-cost electric power, water trans- 
portation, and the local application of new processes being develop- 
ed by federal and state agencies and by private companies. Em- 
phasis is given to the minerals in the region which have been as 
yet little developed, which have value in national defense, or from 
which by-products may be recovered. A small Minerals Testing 
Laboratory is maintained at Norris, Tennessee. 

Close co-operation is maintained with the U. S. Bureau of 
Mines' Electrotechnical Laboratory at Norris, Tennessee and 
with individual operators upon request. 

The following are representative of the Authority's work 
in minerals: 

a. Kaolin deposits in North Carolina are being used in 
much greater quantity by domestic manufacturers of china- 
ware following surveys of these deposits and improvements in 
refining processes made in co-operation with a private producer, 
To a large extent, this kaolin is replacing previous importations. 

b. North Carolina deposits of vermiculite used for light-weight 
insulation buliding material are now being mined and processed by 
several companies following surveys by the Authority of these de- 
posits and their extent and characteristics. 

c. Research is now being conducted by TVA in co-operation 
with the Georgia Engineering Experiment Station at the Georgia 
School of Technology, on olivine mined in North Carolina to develop 


commercially practical ways of obtaining magnesium for use in alloys 
of value in airplane construction. 

d. Other research includes surveys of Tennessee clays, con- 
ducted with the Division of Geology of the Tennessee Department 
of Conservation; Alabama sandstones, with the Alabama Geological 
Survey; and surveys at the request of private producers or others of 
mica, barites, manganese, limestone, and bauxite. 

5. Transportation Studies— -The Authority has completed two 
factual studies showing the disparity in railroad freight rate levels 
on manufactured goods from the South and West to the North, as 
compared with the lower levels within the northern states and from 
eastern Canada to these latter states. These studies published as 
congressional documents brought out the harmful effects of this 
situation on the economy of the South and West and attracted wide 
attention throughout the nation. Recently the Interstate Commerce 
Commission announced a comprehensive investigation of class rates 
(freight rates which apply on items of higher value such as manu- 
factured goods) in all territory east of the Rocky Mountains. 

6. Industrial Economic Studies— Information on transportation 
facilities, resources, power, industry, and statistics on the Tennessee 
Valley, much of which is acquired by the various departments of the 
Authority in the course of their operations, is assembled and compil- 
ed for use in replying to inquiries received from business interests and 
from public agencies about various economic phases of the Tennessee 
Valley. This includes data on industrial water resources in the 
Valley, industries in which the Southeast is deficient, industries in 
the Tennessee Valley, navigation conditions on the Tennessee River, 
and other topics. 1 

Manufacturers inquiring about a plant location in the region 
in most cases request information relating to power, mineral re- 
sources, transportation facilities, water supply, and other data already 
on hand. The Authority does not recommend any particular location 
for the manufacturer, but supplies information on a number of com- 
munities which meet his minimum requirements. 

Community organizations request assistance in solving their 
industrial development and general economic problems. The Au- 
thority makes suggestions and provides data from its files. 

1 Among the many articles of which southeastern manufacturers make 
less than five per cent of the nation's output are the following: electric appli- 
ances and equipment, farm implements, soap, leather goods, toys, men's cloth- 
ing, radios, and tools. 


The TVA does not solicit or encourage migration of industry 
from other regions. Rather, the possibilities of local development 
of new industry are emphasized. The various contributions of the 
Authority's program to industrial development as described in this 
statement are important steps in this direction. 

7. Forest Improvement— -The Authority's foresters are com- 
pleting a detailed inventory of the Valley's forest resources, which 
will make available to industry for the first time complete infor- 
mation on the character, volume, quality, location, and extent of 
forest resources. The information also will be useful in indicating 
what types of forest industry development are possible and most 
beneficial to any given area in the Tennessee Valley. 

8. Community, Recreational, and Health Activities— Certain 
activities of the Authority help improve community facilities for 
working and living upon which industrial development is depend- 
ent. In a largely rural area like the Tennessee Valley, the demon- 
stration value of such improvements in helping small communities 
modernize their facilities and methods is particularly important. 

In summary it should be pointed out that in its activities 
relating to power, transportation, development of natural resources, 
health, and community planning, the Authority has been laying 
foundations important to industrial development. In addition, its 
program of industrial research in co-operation with state research 
institutions aids local development of industry. In the course of all 
these activities, the Authority has accumulated much important data 
of current interest to industrialists, which are made available upon 

It is also important to notice that the effects of these activities 
of the Authority on industrial growth are not all limited to the 
Tennessee Valley proper. For example, TVA electricity is available 
throughout almost all of the state of Tennessee and in a large part 
of northern Mississippi. The benefits of improved river transpor- 
tation extend well beyond the watershed boundaries. Research 
developments such as the cottonseed cooker and barn hay dryer are 
finding use in many states. The work of the Authority thus benefits 
directly many areas outside the Valley. 

It must be remembered here that while the Authority can pro- 
vide these facilities or foundations, they become assets for industrial 
growth only to the extent that the people of the Valley themselves 
take advantage of them as opportunities and work toward their full 
utilization. The same may be said of the research developments and 


economic data being made available by the Authority. Local initia- 
tive and the fullest use of local brains and capital are essential to 
industrial development in the average community. 

From the standpoint of an effective industrial development pro- 
gram in Tennessee certain limitations of the work of the Authority 
should be borne in mind. First, the detailed surveys of mineral, 
water, and forest resources are limited to the valley counties and 
thus exclude more than half the area of Tennessee. Second, as 
pointed out above, the work of the Authority is not limited to Ten- 
nessee but is applicable in a large degree to other southern states. 
Thus, the work for industrial growth hardly places Tennessee at a 
competitive advantage. Third, the Authority is prevented from 
carrying on any program of advertising or publicity to induce pro- 
spective industrialists to consider a location in the area. Direct 
contact work and the selling of a location is also outside the scope 
of the Authority's work. All that the Authorty can do in this di- 
rection is to make such information as it has available to interested 
industrialists upon request. This means that if Tennessee is to take 
full advantage of the basic work of the Authority in industrial de- 
velopment, the state must provide some means of advertising and 
promoting the industrial resources and possibilities discovered in the 


There is no state-wide chamber of commerce in Tennessee to 
serve as an agency for the promotion of industrial development. As 
of December, 1940, there were only 17 chambers of commerce in the 
state and four of these were in the large cities. 

The chamber of commerce in each of the four large cities has a 
full-time secretary, a more or less active industrial development com- 
mittee, and a separate budget for the purpose of bringing new in- 
dustries to the city or surrounding area. In each of these cities the 
chamber of commerce has a working arrangement with some or- 
ganization in the North and East through which it is able to con- 
tact some of the industrialists who are contemplating a southern 
location. In each large city, the chamber of commerce has completed 
a more or less comprehensive industrial survey which shows in a gen- 
eral way the essential facts on resources, industries and the tangible 
locational factors. In their industrial promotional efforts, these cities 
appear to be limited chiefly by the lack of detailed and accurate in- 
formation on resources, the inability to contact industrial prospects, 


and lack of funds for this type of work. The organization for in- 
dustrial promotion in the four large cities is more efficient than 
similar organizations in small towns. Since, roughly, 55 per cent of 
all manufacturing in Tennessee is now concentrated in the large 
city counties, this more efficient organization for industrial promo- 
tion may tend to increase the degree of concentration in these 

With the exception of the four large cities and towns with popu- 
lation of from 10,000 to 25,000 the chambers of commerce are doing 
very little to attract industry. Towns which do not have chambers 
of commerce frequently have at least an industrial committee, a 
group of business men, civic club or some group created for the 
purpose of developing industry in the local area. In most of these 
towns, however, the organization is on paper only and there is very 
little evidence of any active industrial promotion. In view of the 
facts, little more could be expected from independent action by small 
towns and areas. Most of these small towns can offer opportunity 
to but one or two plants and perhaps very small ones at that. The 
possible benefits from obtaining one or two such plants are too small 
to justify the maintenance of an active interest in trying to obtain 
the plants or the financial expense involved in maintaining an active 
organization. Too, in practically every case, these towns are too 
small to finance the collection and analysis of the detailed indus- 
trial data necessary to interest a prospective industrialist. Further- 
more, it is extremely difficult for these small towns, acting independ- 
ently, to learn of desirable industrial prospects. If industrial pro- 
motion is to be effective in developing industry in the small towns 
in Tennessee, aid must come through some larger outside agency 
which can distribute the overhead cost of industrial development 
over a greater number of located plants, undertake the analysis of 
resources, contact industrial prospects, and aid in selling them a 


In an effort to increase the volume of traffic on their respective 
lines, the several railroads in Tennessee, as in other states, maintain 
active industrial development departments under the direction of an 
industrial engineer. In the files of these departments and to some 
extent in material published by the railroads there is obtainable a 
vast amount of the more readily available information on industries, 
resources and locational factors in the freight territory served by these 
railroads. The larger railroads have their own geologists and indus- 
trial engineers to supplement through original investigation the 


material on resources provided by federal, state and private agencies 
and to prepare detailed reports on given locations for a particular 
plant. But, in general, these research and industrial development 
departments of the railroads depend upon the information on re- 
sources provided by the established agencies and the particular 

These railroad industrial development departments offer cer- 
tain advantages and disadvantages. First, through their contacts 
in the financial centers and the more highly industrialized areas 
they are able to learn of contemplated industrial moves or indus- 
trial expansion. Through these contacts the railroads have pro- 
vided many of the smaller towns along their systems with industrial 
prospects. Second, it is probably true that the industrial develop- 
ment departments of the railroads are more competently staffed and 
more thoroughly trained in the technique of plant location than 
any group in Tennessee except persons in the Tennessee Division 
of Geology and the industrial committees in the four large 
cities. There are, however, two important difficulties. First, since 
these rail systems cover states other than Tennessee these depart- 
ments are interested in locating plants on the system rather than 
specifically in Tennessee. Second, since the interest of the rail- 
roads in locating plants is to develop traffic for their particular road 
they will obviously seek to develop industries in towns served by 
their road alone and to avoid towns served by competing roads. 
Hence, the industrial development departments of the railroads are 
less active in the industrial development of towns with two or more 
railroads. Too, since many small towns in Tennessee are without 
rail service, but may develop industries served by truck, the rail- 
roads are obviously not interested in developing industries in these 

Prior to their sale to the Tennessee Valley Authority the pri- 
vate power companies in the state assisted industrial development 
in Tennessee in three ways: 

1. The private power companies employed industrial engi- 
neering firms to prepare industrial surveys of various 
towns and areas in the state. 

2. The power companies advertised the industrial advantages 
of Tennessee in national magazines. 

3. The private power companies were able to secure industrial 
prospects through contacts in industrial and financial re- 
gions through the parent organization and subsidiaries. The 
industrial divisions of the power companies were important 
agencies in selling these prospects on a Tennessee location. 


In the field of investigation and research for industrial develop- 
ment the work of The Tennessee Valley Authority represents a dis- 
tinct gain as compared with the work of the private power com- 
panies. As for continued national advertising of the state's resources 
and industrial opportunities in publications which come to the at- 
tention of industrial prospects and in the matter of contact and 
selling of these prospects, the disappearance of the private power 
companies represents a definite loss which has not been met by 
any public or private agency. 


Tennessee is co-operating with other southern states in remov- 
ing the barriers to, and in working for, industrial development 
through the Southern Governors' Conference which is composed of 
the governors of 1 1 southern states. The Southern Governors' Con- 
ference is sponsoring a ten year development campaign through 
which it is hoped to produce a better "balanced" economy, to adjust 
agriculture to present requirements, accelerate industrial expansion, 
and improve human welfare in the South. To give direction to its 
activities the Conference has adopted "Ten Roads to Progress." 
Three of these are directed to industrial development: 

1. "Balance farms with factories" 

2. "Balance scientific production of high quality products with 
scientific marketing, including grading, processing, pack- 
ing, and adequate transportation without unreasonable 
trade barriers" 

3. "Utilize and develop all natural resources in keeping with 
wise conservation policies." 

A general chairman of the ten-year campaign has been ap- 
pointed by the Southern Governors' Conference and each governor 
has been requested to appoint a general chairman for his state. 


The preceding discussion shows that considerable work of one 
kind or another is being performed by a number of independent 
agencies in Tennessee to promote industrial growth in the state as 
a whole or particular parts of the state. Certain limitations of the 
work of these separate agencies have been noted in the above dis- 
cussion of their principal activities. When one attempts to fit the 
activities of these several agencies together and look at their work 
as a whole, there are immediately apparent several crucial gaps or 


weaknesses in the program for industrial development in Tennessee 
as compared with industrial development programs in a number of 
competing states. 

1. There is in Tennessee no integrated state-wide program for 
industrial development. There is no state agency definitely 
charged with the responsibility of promoting industrial 
development in the state. There is not even a state chamber 
of commerce. Instead, as pointed out above, there are a 
number of different agencies and groups working independ- 
ently and with varying amounts of effort to promote indus- 
trial development in particular areas of the state and to 
provide the necessary information for its development in 
certain fields. Obviously, since there is no state-wide in- 
dustrial program there are no clearly stated objectives and 
no clearly stated policies of industrial development. 

2. There does not exist in Tennessee any permanent organiza- 
tion, adequately financed and with trained personnel, for 
carrying on a program of industrial research and promotion 
for the state as a whole. This is the situation in the state 
despite the inescapable conclusion that the industrial de- 
velopment of an area which can be attributed to deliberate 
effort on the part of promotional agencies takes sustained 
effort over a long period of time, costs money, and requires 
competently trained persons who make industrial develop- 
ment their main business rather than a side-line. The truth 
is that except for a full-time person in four or five cities, and 
except for the work of the Tennessee Valley Authority and 
the Tennessee Division of Geology practically all efforts 
to promote industrial development in Tennessee are spo- 
radic, side-line efforts. True, various groups are active for 
brief periods, but then activity dies down and the problem 
is forgotten. Aside from that specifically mentioned above, 
such promotional work as is carried on in Tennessee is 
performed by persons or agencies whose main jobs lie else- 

3. Not only is there no permanent state organization for carry- 
ing on a state-wide program of industrial development, but, 
even worse, there is no machinery for effecting co-operation 
among the several independent agencies now working on 
the problem. As now carried on there is no arrange- 
ment for pooling the available information on industrial 
resources and possibilities and soliciting the experience and 


thinking of the ablest workers and students of industrial 
development within the state. 

4. Because of the cost involved and lack of trained leadership 
for the purpose, the individual small towns of Tennessee are 
not in a position to collect and analyze the necessary detailed 
information on resources, advertise their industrial oppor- 
tunities, contact industrial prospects and sell them a loca- 
tion. Consequently, except in rare instances, there is prac- 
tically no effective effort to promote industrial development 
in the small towns of Tennessee. Most of the small towns 
can offer advantages to but one or two plants at most. The 
benefits to be obtained and the uncertainty of getting these 
plants do not justify the expenditures necessary to collect 
and analyze the local data and maintain an effective local 
organization to try to secure these plants. 

5. Much of the detailed information on Tennessee resources 
essential to an industrial development program is not a- 
vailable. While considerable research on resources has 
been completed and is now being carried on by the 
Tennessee Division of Geology, the Tennessee Valley 
Authority and The University of Tennessee, as previously 
pointed out, their work is limited by lack of funds. The 
industrial research program needs to be stepped up and inte- 
grated. On far too many of the state's industrial resources 
in many areas there is available little precise detailed in- 
formation of the type required by an industrialist in making 
a locational decision. Instead of the general information 
now available, further geological, physical and chemical re- 
search is essential to snow (1) the exact location of the re- 
sources, (2) the quality of the material, (3) the commercial 
quantities available, (4) the permanency of the supply, and 
(5) methods of overcoming processing problems peculiar to 
the given supply of the resource. As Dr. Pond, State 
Geologist, has pointed out, Tennessee has the resources to 
make it "a great industrial area," but there are lacking 
"adequate surveys, records, maps and other data to definite- 
ly convince industry that this is the logical place to make 
money." 1 

6. There is no program for advertising the industrial resources 
and industrial opportunities in Tennessee. An appropria- 
tion of $100,000 is available for advertising the state's at- 

x Tennessee Department of Conservation, The Natural Resources of 
Tennessee (1939), p. 9. 


tractions for tourists, but there is no fund for advertising 
the state's industrial resources. As pointed out in Chapter 
IV, a number of competitive states have appropriated $50,- 
000 to $100,000 for this purpose. 

There are no systematic means of discovering or contacting 
out-of-state industrial prospects who might be induced to 
locate new plants or branch plants in Tennessee. Aside 
from the chambers of commerce in the four large cities 
and the railroads, there are practically no arrangements for 
learning of prospective industrialists who might locate in 

There is in the state no definite central agency for supply- 
ing accurate and detailed information on industries, re- 
sources, and industrial possibilities requested by interested 
industrialists. Consequently, such requests are generally 
referred from one agency to another with the result that 
event after considerable delay only general and incomplete 
answers are available. 

Tennessee is without the services of an industrial engineer 
to contact prospects and supply them with data on their 
particular industry and to aid them in choosing a location. 




If one agrees that the combined force of the arguments pre- 
sented in the preceding chapters of this study is sufficient to justify 
increased attention to an industrial development program in Ten- 
nessee, the immediate question is: What, if anything, can be done 
about it. Recognizing the need for greater industrialization in the 
state as a means of increasing wealth and economic opportunity and 
desiring its realization is one thing, and achieving that end within 
any reasonable time and cost limits is another. Consequently, it is 
important to examine some of the limitations of any industrial de- 
velopment program and to think carefully of some of the general 
fields within which a sound program may be reasonably expected to 
produce positive results. 


In examining the possibilities and limitations in setting up an 
industrial development program in the state there are certain funda- 
mentals which it is necessary to recognize. 

First, any effective program for industrial development must be 
a long-range program. Eliminating the discovery of large quantities 
of some new resource and revolutionary technical changes which 
suddenly give new importance to old resources, the difficulties in- 
volved in developing new industries in a region or inducing old 
ones to move in are so great that they can be overcome, if at all, 
only over a period of years. Expectation of material increases in 
industry in any short period is not justified either on the basis of 
the theoretical and practical difficulties involved or on the basis of 
the experience of other geographical areas with industrial develop- 
ment programs. Rapid development from a program is an excep- 
tion rather than the rule. As pointed out below, this fact has im- 
portant implications in setting up any industrial development pro- 

Second, the uncertainty of the results and the length of time 
before material benefits are likely to be received under any indus- 
trial development program generally make it difficult to arouse 
enough interest initially and sustain that interest long enough to 
secure adequate financial aid for a sound long-range program. 
Instead, specific groups likely to share in the immediate benefits 
from any new industry are likely to be very active once such a pros- 


pect is in sight; but, because of previous inactivity, they are very 
likely to be caught without adequate local data to provide the pros- 
pect with enough accurate industrial information to justify serious 
consideration of their particular location. Consequently, sporadic 
efforts to obtain industry are likely to resolve into a contest of finan- 
cial inducements between interested localities with the all too fre- 
quent result that the area obtaining the industry gives up in sub- 
sidies and indirect costs more than it need have and, in some cases, 
more than the benefits from the new industry. 

Third, in addition to lack of interest on the part of influential 
citizens and rather widespread inertia, almost any development pro- 
gram is likely to encounter serious opposition from particular persons 
or groups in different localities. Frequently the insurmountable or 
"defeating element" in a state-wide industrial development program 
"is the fact that it is impossible to obtain an equal and simultaneous 
benefit to all every time any benefit is obtained." 1 

In this connection a further serious difficulty of organizing and 
maintaining a state-wide industrial development program in Ten- 
nessee arises from the shape of the state and the geographical and 
industrial divisions within the state. The length and narrowness 
of the state plus the fact that two large cities, Memphis and 
Chattanooga, are located right on the state line means that many 
of the benefits from an industrial development program are likely 
to spill over into border states and thus increases the difficulty of 
obtaining support for such a program. Aside from the political 
differences following in general the three major geographical di- 
visions of the state, there are marked differences in the present 
amount and type of manufacturing and, to all appearances, differ- 
ences in the possibilities of developing manufacturing in these three 
geographical divisions. These differences are likely to be strongly 
reflected in differences in the degree to which these divisions would 
support a state-wide industrial development program. 

Fourth, it is important to recognize that Tennessee is simply one 
segment of the entire nation and more particularly of the South. 
Hence, insofar as there are natural or artificial forces such as the 
freight rate structure, pricing systems, labor regulations, etc., limit- 
ing and retarding the rate of industrial development of the South 
as a whole, these forces are operating to retard the rate of growth of 
industry in Tennessee. Of course, such limiting forces do not 
affect equally all states and areas in the South. Because of this 

] F. H. McDonald, How to Promote Industrial and Community Develop- 
ment (New York: Harpers and Brothers, 1938), p. 46. 


fact, and perhaps because of larger and more valuable available re- 
sources, manufacturing in Tennessee has developed more rapidly in 
the last 16 years than in all but one other southern state. These 
South-wide limiting forces may be offset to some extent by more in- 
tensive effort on the part of Tennesseans, but even so, these forces 
reduce the rate of growth of industry in the state below the rate 
it would achieve if these restraints were removed or reduced in 
force. The point here is that any industrial development program 
inaugurated by and limited to Tennessee alone can do little to re- 
move or reduce the South- wide barriers to industrial growth. Ef- 
fective relief, if it comes at all, must come through the co-operation 
of Tennessee with other southern states. Therefore, any program 
for industrial development in Tennessee must provide for effective 
co-operation with other southern states and southern agencies to dis- 
cover South-wide barriers and to work for their removal. 

Fifth, it is tremendously important to recognize that an indus- 
trial development program must operate within the framework of a 
private enterprise system. Hence, it ought to be crystal clear to every- 
one concerned with the formulation and execution of such a pro- 
gram that, operating in a private enterprise system, there are definite 
limitations to the effective work designed to increase the rate of in- 
dustrial development in a given area. This fact, privately owned and 
operated business, must be at the root of our thinking about any 
effective industrial development effort. Since economic resources 
are legally owned by individuals and legally organized groups of 
individuals and not, except in a few cases, by governments, and 
since manufacturing in particular is a field of private enterprise, 
the establishment of new plants or the expansion of old ones in an 
area is in response to expected profit prospects. This remains true 
even though in the current defense program some plants are erected 
or expanded in given areas for political and military reasons. Hence 
it is essential to recognize that successful efforts to increase the rate 
of industrial development in any given area must increase the ex- 
pected profit opportunities in that area in comparison with the 
expected profit opportunities in other areas. Presumably, the indus- 
trialist is seeking that location at which the total unit cost of his 
final product delivered to his consumers is a mimimum, that is, a 
location such that the combined unit cost for all locational factors, 
including the cost of reaching his market, is a minimum. To put 
it another way, the industrialist is seeking that location where his 
expected profits will be a maximum. 

Clear thinking about the problem of industrial promotion de- 
signed to increase the rate of industrial development or direct in- 


dustrial growth into desirable channels must, it seems evident, in- 
volve a careful analysis of each of the more important locational 
factors to determine, as far as possible, what a development program 
or a promotional agency can do in connection with each factor to 
increase its pulling power for prospective industrialists over the pull- 
ing power it is now exerting. 


In examining the possibilities of increasing the pulling power 
of specific locational factors through an industrial development 
program, double differentiation between two general types of in- 
dustries and types of locational factors is important. In the first 
place, it makes for clarity of thought to differentiate between indus- 
tries on the basis of whether they serve purely local markets or not. 
In the second place, differentiation on the basis of whether loca- 
tional factors are ubiquitous or unique helps one to understand more 
clearly the effectiveness of an industrial development program. 

On the basis of the first classification there are some industries 
which supply purely local consumers and other industries based on 
human and material resources which serve markets outside the 
local area. 

The industries in the first class, namely, those industries 
supplying local consumers, are dependent entirely upon the local 
market, are geared to local population and local purchasing power 
and in general cannot be expected to grow more rapidly than popu- 
lation and purchasing power. The growth and development of 
these industries depend upon the growth of other industry and trade 
in the area. For this group of industries, all that any industrial 
development program can accomplish is to discover that part of local 
demand which could be, but is not now, supplied by local pro- 
ducers. Here the work must obviously be limited, first, to discover- 
ing the goods which are now bought outside the locality but which 
could be profitably produced locally and, second, to making this 
information available to possible producers. 

Industries in the second group, those built upon human and 
material resources and serving other than local markets, are the ones 
with which an industrial development program must be primarily 
concerned. These are the industries which attract and hold popu- 
lation, which further create complementary or auxiliary industries 
of the first type above as well as feeder industries supplying semi- 
finished goods, parts and raw materials. If an industrial develop- 
ment program is to be effective in increasing the pulling power of 


locational factors, it is largely with this latter group of industries 
that it must work. 

In approaching the problem of industrial development of this 
second group of industries from the possibility of increasing the 
pulling power of locational factors, it is helpful to differentiate still 
further between two types of locations and locational factors. First, 
there are many industries for which the choice of a location is a 
matter of indifference between several alternative locations. Second, 
there are other industries for which certain locations are unique. 
In this case there is a definite estimable net cost advantage in 
locating in one locality rather than in others. This distinction is 
important. Some plants locate where they do because they must 
on the basis of probable manufacturing costs. Others, where prob- 
able manufacturing costs appear equal, locate where they do be- 
cause that location is sold to them. 

In the latter group of industries, apparent equality of locational 
advantage in several locations probably results from one or some 
combination of the following. For some industries many location- 
al factors are ubiquitous, that is, given factors have equal pulling 
power in a number of locations. In still other cases the combina- 
tions of factors give equal unit cost, exert equal pull, in a number 
of locations. Here a number of locations are available "which 
offer about the same net advantage in so far as probable manu- 
facturing cost can be estimated." 1 Some low cost factors in one 
locality are offset by other low cost factors in other localities so 
that probable unit cost of manufacturing and marketing in the 
different localities are, for all practical purposes, equal. In still 
other cases the probable Unit manufacturing cost cannot be esti- 
mated accurately enough to indicate any net advantage between 
different localities. 

In the case of ubiquitous factors or equal locational factor 
combinations, the locational decision of the industrialist turns upon 
(1) intangibles, (2) effective selling by the promotional agency, and 
(3) subsidies and financial inducements on the part of the different 
locatlities. All that an industrial development agency can hope to do 
here is to attempt to improve the intangibles, do a more effective 
selling job, and increase the financial inducements offered to in- 
dustry. 2 

! W. Gerald Homes, Plant Location (New York: McGraw-Hill Book Co., 
Inc., 1930), p. 216. 
2 Ibid. 


Effective efforts to increase the rate of industrial growth must 
be aimed at eliminating and preventing unfavorable factors and 
improving the drawing power of the intangibles, such as, the crea- 
tion of a favorable community attitude sympathetic toward indus- 
try, a unified community spirit and an air of progressiveness, sound 
government and fiscal policies, good schools, recreational opportuni- 
ties, etc. The achievement of these ends is slow and difficult and 
appears to most persons but remotely related to industrial develop- 
ment. Consequently, in the haste of the leaders of many communi- 
ties to obtain concrete results these intangibles are neglected year 
after year for more immediate programs, and the communities after a 
period of years find themselves no nearer the goal than when they 
started. Finally, it must be realized that the motivation for the im- 
provement of government, schools, physical appearances of towns 
and recreational facilities, and the creation of a unified, progressive 
spirit must come largely from other reasons than from the desire for 
industrial development. For these reasons, it is doubtful whether 
any industrial development program on a state, region or city basis 
can be powerfully enough motivated to improve the pulling power of 
the intangible locational factors enough to bring any appreciable in- 
crease in industrv except in rare cases. This does not mean that 
efforts to improve the intangibles should be omitted from a sound in- 
dustrial development program, but simply that the results from such 
efforts should be expected to be small and slow in coming. 

The principal hope of attracting the ubiquitous factor industries 
lies in effective advertising, prompt and widespread contact work, 
and efficient selling of the intangibles in given localities. Here 
results from an industrial development program must come from 
carefully searching out the most favorable factors and presenting 
them by most modern selling methods. After all, such industries 
have to locate somewhere and such a program would, at least, more 
nearly assure the several localities in Tennessee of their share of 
such industries. How much larger that share is than what these 
localities are now receiving, there appears no way of estimating. 

There remains the use of subsidies to induce the location of 
such industries. It is the author's opinion that, theoretically, these 
have no place in any sound program of industrial development. 
The matter of subsidies is treated briefly elsewhere in this study. 

Two warnings should be suggested against any program de- 
signed to attract industries where the locational factors are ubiquitous. 
First, since the locational factors are ubiquitous, the competitive 
scramble for industries on the part of different localities develops 

into a contest of high pressure selling methods and a competitive 
race of financial inducements to industry to locate in a particular 
area. In many cases there is grave danger that the financial and 
social costs of obtaining and holding a new plant or industry may 
exceed the benefits to the community. Second, when locational 
factors are ubiquitous the industries are less stable than when loca- 
tional factors are unique. In the former case the only thing that 
holds a plant in a given location is the continuation of local subsidies 
and the cost of moving to a new location. If and when the sub- 
sidies offered by some new locality exceed the subsidies received in 
the old location by more than moving costs, such plants are likely to 
move and create serious economic loss and readjustment problems 
for the old community, whose economic life has become more or less 
dependent upon the operation of the plant. 


In the case of unique locations the problem is different. Here, 
obviously, the crucial question is what, if anything, can be done to 
increase the effective pulling power of important locational factors 
so as to make certain locations unique? This immediately raises the 
question whether significant locational factors are controllable, that 
is, whether they can be made more favorable by an industrial de- 
velopment agency. If there are controllable locational factors, then 
a planned industrial development program may conceivably increase 
the industrial pulling power of these factors. In so far as locational 
factors are not controllable, the work of an industrial development 
program must obviously be limited to discovering and making known 
the relevant information about these key factors involved in the pro- 
spective manufacturer's estimate of probable manufacturing costs. In 
the case of the non-controllable locational factors which make cer- 
tain locations unique for particular industries, all that any program 
aimed at increasing the rate of industrial development can be ex- 
pected to accomplish comes, in a broad sense, under the head of 
furnishing accurate information on the key locational factors to 
prospective industrialists. If a given location is unique, if there 
is really a single most economical location, then the industry ought 
to go there. In this case a sound industrial development program 
is obviously limited to providing sufficient information about the 
cost factors involved in that location so that the manufacturer may 
discover the one best location and locate there rather than in a 
less favorable one. 

This does not mean that, as far as these industries are con- 
cerned, an industrial development program should consist largely of 


advertising, publicity and contact work. Far from it! Of course 
these are necessary parts of any successful program. But continu- 
ing research aimed at ascertaining as precisely as possible the rele- 
vant information about the key locational factors involved in esti- 
mating probable unit manufacturing cost is absolutely basic to, and 
must precede, any successful publicity and promotional program. 

In the author's opinion, more industrial development programs 
have failed because effort and funds were devoted primarily to pub- 
licity with only minor attention to basic research than for any other 
single reason. Too frequently, overly anxious groups have rushed 
into print with commonplace and vague general statements of loca- 
tional advantages only to be forced to admit, if they got an interested 
prospect, that reasonably accurate industrial information of the kind 
required in making a locational decision was not available or even ob- 
tainable within any reasonable decision- making period. The fur- 
nishing of accurate information— the sole help in the case of non- 
controllable unique locations— involves planned research to collect 
the relevant detailed information on the important locational factors, 
to determine more precisely the commercial quantities and charac- 
teristics of raw materials and labor, and to provide reasonable esti- 
mates of processing costs. 


Those faced with the responsibility of formulating and execut- 
ing an industrial development program must, in addition, frankly 
consider the extent to which particular locational factors can be made 
more favorable, that is, the extent to which their pulling power may 
be increased. This question obviously must be decided by the pro- 
gram formulating group in the light of given local conditions and in 
terms of a specific program. In approaching the problem of increas- 
ing the pulling power of the locational factors, it is important to con- 
sider certain basic facts. 

Many students of industrial location believe that the most im- 
portant technical factors influencing changes in industrial location 
are power (and fuel); transportation costs, particularly on finished 
products; changes in the kind of raw materials required in industry; 
and, in the case of the South, labor costs and reduction of labor 
troubles. Certainly, much of the movement of industry from other 
areas to the South has been the result of efforts to obtain low wages 
and to escape union pressure. Geographical shifts in markets con- 
stitute a powerful locational pull, but since markets shift slowly this 
factor is largely a matter of transportation costs of finished products. 


In the opinion of Frederick G. Tyron, an able student of 
locational changes in industry, the locational pull of resources 
changes with ( 1 ) exploration and discovery, (2) expanding transpor- 
tation facilities, (3) developing technology, and (4) the depletion of 
other resources. 1 If this view be accepted as substantially correct, 
what can an industrial development program hope to accomplish? 
Since such a program could hardly be expected to affect the rate of 
depletion of resources in other areas, most of its effort toward in- 
creasing the pull of resources must be directed toward (1) increas- 
ing transportation facilities and lowering transportation costs, (2) 
exploration and discovery of new commercial resources, and (3) 
the development of new products and new technical methods of 
utilizing currently unused or little used resources. 

In some instances a carefully planned industrial development 
program may discover, reduce, or even eliminate artificial (custom- 
ary, regulatory or legislative) handicaps affecting transportation, 
labor costs or the effective tax burden. Planned research may, also, 
discover new or additional raw materials, determine the commercial 
quantities available, the amount and permanency of the commercial 
supply, and indicate probable processing costs. In the case of some 
raw materials, there are technical problems of processing which 
geological, chemical, physical and engineering research may solve 
and thus transform a non-commercial material into a commercial 
one. In still other instances, there are local industrial possibilities 
which, because of the limited supply of raw materials or the limited 
market for the product, are too small to be developed by large national 
concerns, but which may be profitably developed by small local units 
or small outside producers. Yet these industrial possibilities remain 
undeveloped because the necessary detailed information on local re- 
sources is not available to small industrialists who might be interested, 
and these interested parties are not, because of their size, in a position 
to obtain it. Large-scale industries may be expected to learn of indus- 
trial opportunities as they develop in Tennessee, because they are well 
equipped to locate and appraise these industrial possibilities. The 
small concerns, both old and new, cannot be expected to do the same. 
They cannot afford the industrial research facilities for doing the 
necessary spade work on resources. Planned research and investiga- 
tion combined with proper contact work under an industrial develop- 
ment program aimed at making information available on small quan- 
tities of local resources to small enterprises unable to finance re- 
search, or with staffs too small to appraise industrial opportunities, 

1 Carter Goodrich et at; Migration and Economic Opportunity, op. cit., 
p. 255. 


may increase the rate of industrial development by activating more of 
these small latent industrial possibilities. 

We must not delude ourselves concerning the efficacy of any 
industrial development program in increasing the rate of growth of 
industry by increasing the pulling power of particular locational 
factors. There is a very real danger that many persons or groups 
in Tennessee may fail to support a program for industrial develop- 
ment because of the belief that the influence of the Tennessee Valley 
Authority upon power rates and transportation costs are sufficient to 
bring rapid industrial growth. Cheap hydro-electric power and 
water transportation developed by TVA are so confidently expected 
by many to bring rapid industrial development of the service area 
that many persons habitually speak of the Tennessee Valley as the 
future "Rhur of America." 

Lower power and transportation rates are justifiable causes for 
satisfaction and definitely favorable factors for industrial develop- 

But cheap hydro-electric power alone is no guarantee of indus- 
trial development in the area. As pointed out in an able study of the 
decentralization of industry: 

It [cheap electric power] makes the choice of certain loca- 
tions less imperative, but for most industries differentials in power 
cost are not in themselves a very compelling direct inducement. 
The aggregate expenditure for fuel and purchased electric energy, 
according to the Census of Manufactures, "is the smallest of the 
major costs of manufacturing, having amounted in 1929 to 2.8 
per cent of the gross value of products manufactured." Pur- 
chased electric energy alone represents only 0.7 per cent of the 
value of manufactured products. For the 'average' industry, 
therefore, other things being equal, purchased electric energy 
is too small an item to be a potent incentive in location. It 
exceeds one per cent of the value of manufactured products 
in only six of the forty-nine industries examined: clay products, 
glass, paper, chemicals, rubber goods, and cotton goods, the 
highest ratio being 3.3 per cent in the case of chemicals not 
elsewhere classified. 1 

Only in industries sometimes termed "electro-process" in- 
dustries—that is electro-chemical and electro-metallurgical plants 
—is electric energy sufficiently important to be a major consider- 
ation. Here there may be a question whether it is cheaper to 
bring the raw materials to the power source, as for instance at 
present in the manufacturing of aluminum, or to produce power 
near the raw material deposits. In both cases, a regional shift 
may coincide with a change in the locational pattern, but the 

a Goodrich and others, "A Case for Diffusion", Migration and Economic 
Opportunity, op. cit., p. 385. 


industries in which this factor is of great significance are few and 
are characteristically unimportant as measured by employment. 2 

On the basis of these facts, one cannot escape the conclusion 
that cheap hydroelectric power alone does not assure the rapid in- 
dustrial development of the area. 

The development of water transportation on the Tennessee 
River will place many existing firms in a more favorable competitive 
position for both raw materials and markets and thus lead to their 
expansion. Transportation costs will probably lead to the establish- 
ment of some new enterprises in those industries which are, by the 
lower transportation costs, placed in a position where they can now 
compete with firms in other regions. As in the case of cheap hy- 
dro-electric power, this is a definitely favorable factor, but it is possi- 
ble that many persons are overoptimistic about the effect of cheaper 
water transportation. The safest conclusion appears to be that the 
industrial expansion from this cause alone is not likely to be very 
large in terms of the total now in Tennessee, or in terms of the 
total growth for Tennessee. 


Let us turn now from the question of increasing the pulling 
power of the locational factors to the question of the different ways 
in which industrial expansion may come. It is obvious that indus- 
trial expansion in a given area must come from one or more of the 

1 . The development of satellite industries composed of feed- 
er plants which supply raw materials and semi-finished 
products now obtained outside the area by local manufac- 
turers, and plants which supply consumer goods required by 
increased population and higher community income 

2. The growth of industries already located in the area 

3. The migration of industries from less favored regions and 
the construction of branch plants by existing firms to supply 
increased demand 

4. The development of entirely new industries in the area. 

The work of a planned industrial development program in con- 
nection with the first group has already been considered in this 

2 lhid., p. 386. 


tern of private enterprise, individuals and corporate groups will con- 
chapter. 1 As for group two, there are probably in many cases dis- 
tinct possibilities in studying the handicaps limiting the growth of 
presently located industries and in attempting to create conditions 
more favorable for the growth of these industries. The value of such 
efforts must be appraised in the light of the actual conditions af- 
fecting particular industries. The question is: Can a developmental 
agency change the factors that make for the success of a given plant 
in a particular location enough to justify expansion of the plant more 
rapidly than it would otherwise expand? Even though in perhaps 
a great majority of these cases the material results of an industrial 
development agency's efforts along this line are not likely to be great, 
the possibility deserves careful consideration, especially in the case 
of small firms and declining industries. 

Many southerners think of industrial expansion almost exclu- 
sively in terms of the migration of plants from other areas and the 
construction of new branch plants in the South. It is true that the 
keener competition resulting from the shrinkage of markets forces 
manufacturers to seek a competitive advantage through cost reduc- 
tion, and thus is obviously causing producers to examine more care- 
fully their locational advantages, especially when faced with the 
problem of plant expansion and when plant depreciation becomes 
large enough to permit consideration of a possible move. But one 
must not overlook the basic fact that industry is not very mobile. If 
one thinks very realistically about the difficulties and costs of moving 
a plant from one location to another, it is easy to see that in the 
great majority of cases an industrial development program can reason- 
ably hope to achieve but little expansion from this source. The blunt 
fact is that very few plants really move. There are exceptions, of 
course, such as the wholesale migration of textile plants from New 
England to the South. 

It is, therefore, largely in the increase of capacity in old indus- 
tries through the construction of new or branch plants and in the 
development of entirely new industries that an industrial develop- 
ment program must seek its results. Even here the development 
program cannot be expected to be credited with all the develop- 
ment in the area. In most areas, some growth or development may 
be expected without any organized program. Some industries will 
move in, new industries will be established if the locational factors 
are favorable, without any effort on the part of the state, regions 
within the state, municipalities, or organized groups. Under a sys- 

x See p. 86. 


tinue to discover some of the opportunities for profitable industry 
if there are such opportunities. Some growth may be expected. 
The crucial questions which thoughtful persons concerned with the 
consideration and formulation of an industrial development pro- 
gram should ask themselves about such a program are: First, will 
the rate of industrial growth expected from such a program, in the 
light of the limitation previously discussed, be enough greater than 
it would be without any organized program to justify the expendi- 
tures involved? Second, will the industrial growth under a planned 
program be in more desirable industries than without the program? 
Third, is the industrial development program likely to produce a 
more desirable geographical distribution of industry within the state? 


It is evident that these questions must be thought through in 
the light of specific programs and on the basis of more information 
than is now available. However, on the basis of the limitations and 
possibilities of an industrial development program, and on the basis 
of the experience in other states, the principal activities through 
which a program may increase the rate of industrial growth appear 
to be: 

1. Publicity and contact work 

2. Long-run improvement of intangible locational factors and 
the prevention of political, social and economic factors un- 
favorable to industry 

3. Subsidies 

4. Research to provide more acurate information on identi- 
fied resources 

5. Exploration and research to discover new resources 

6. Research to solve processing problems for what are now 
considered non-commercial resources 

7. The development of new products 

8. Research to discover artificial handicaps and efforts to re- 
duce or remove them. 

On the basis of the results which might be achieved through 
these activities, the following facts would at least seem to argue for 
more serious and wide-spread consideration of an industrial develop- 
ment program for the State of Tennessee than has yet been given 
to it: 

1. Some industry for one reason or another is actually moving 
to the South and in all probability will continue to do so. 


2. Many old industrial firms are adding to their capacity and 
placing that additional capacity in the South in the form 
of branch plants. 

3. Several rapidly growing industries such as chemicals, in- 
cluding rayon, paper, etc., based upon southern raw ma- 
terials are being developed in the South. 

4. The increased quantity of hydroelectric power at lower 
rates and the development of water transportation on the 
Tennessee River, by the Tennessee Valley Authority, have 
increased the industrial pulling power of these factors. 
Some program should be set up to capitalize on these fac- 
tors as far as possible. 

5. Accurate information on the commercial quantities of Ten- 
nessee's several resources of the type required in making a 
location decision is lacking in most cases. 

6. There exists no organized system for placing the relevant 
information before the majority of possible industrialists 
who should consider particular locations in Tennessee in 
deciding on a southern location. 

7. Competitive southern states are thinking through and set- 
ting up programs to obtain new industries. 

8. While the rate of industrial growth in Tennessee during 
the last 16 years has been more rapid than in the entire 
nation, the South and in any other state except Virginia, it 
is necessary to remember that the accelerated rate of indus- 
trial growth in recent years has been due almost entirely to 
the location and growth of five large plants, namely, Bem- 
berg, North American Rayon, Tennessee Eastman, E. I. 
Dupont and the Aluminum Company of America. Some 
of these, or even all of them, might as easily have located 
outside of the state. If Tennessee does not develop an ef- 
fective industrial development program, such plants in the 
future may be sold a location in competitive southern states 
which have an effective organization for doing the selling 

In brief two points are important. First, since certain indus- 
tries are growing in the South and certain plants are going to lo- 
cate somewhere in the South in the next few years, Tennessee 
ought to give serious consideration to an industrial program aimed at 
getting its share of that industry, based on its resources, while that 
industry is locating. It is obviously much easier to obtain a plant 
looking for a location than to induce one to move after it has located. 


Second, because of the rapid rate of industrial growth in Tennessee 
in recent years, there is danger that responsible persons in Tennessee 
may feel too complacent about the state's future industrial growth to 
act as competently and as vigorously as they should. 

In the light of these facts it is difficult to escape the conclusion 
that responsible citizens and interested groups in Tennessee ought 
to give serious consideration to setting up a state-wide industrial 
program to operate in those fields in which such a program might 
prove effective. 




In the previous chapter we examined some of the limitations 
of an industrial development program and reached the conclusion 
that, in view of these limitations, such a program might prove ef- 
fective in certain fields of activity. In the present chapter we pro- 
pose to outline in some detail a number of the specific things which 
we believe a carefully planned industrial development program in 
Tennessee might attempt in each field and which we believe those 
charged with the formulation and integration of such a program 
should consider. In so doing it is not intended to suggest, much 
less to contend, that an integrated industrial development program for 
Tennessee should include all of the things listed here. Neither is it 
suggested that this list is comprehensive enough to include all the 
things which a final programs should attempt. A workable final pro- 
gram must obviously be formulated in terms of the scope of the 
specific job to be attempted, the funds available, and the organ- 
izational facilities for carrying out the work. An acceptable program 
can emerge only after careful consideration and considerable com- 
promise on the part of affected geographical areas and groups. 
This partial and preliminary list of elements in an industrial pro- 
gram is presented merely as suggestive of some of the things which 
an effective program might include. This list of suggestions for 
an industrial program are here set out in some detail in the optimistic 
hope that by focusing attention upon some of the problems and ele- 
ments of an industrial program— many of which are at present re- 
ceiving little or no attention in Tennessee— it may cause us to con- 
sider more carefully the essential parts of an appropriate industrial 
development program for the state and accelerate action toward the 
formulation and execution of such a program. 

On the basis of the theoretical reasoning in the last chapter and 
the experience of successful industrial development programs in 
operation in other states, the broad general fields of activity in which 
a program may be effective in increasing industrial development 
appear to be: 

1. Research and fact finding 

2. The formulation of basic industrial policies believed desir- 
able in achieving a satisfactory industrial pattern 


3. Public education to improve the intangible locational fac- 

4. Public information, publicity, and promotional selling. 
Here we propose to examine the details of an industrial develop- 
ment program under these four major divisions. 


One thing that practically all students of industrial develop- 
ment agree on is that a sound program must be built upon and 
provide for accurate information on resources and industrial possi- 
bilities. Dr. Walter F. Pond, Tennessee State Geologist, empha- 
sizing the need for research to develop industrial resources in Ten- 
nessee, writes: 

That .... if we achieve the maximum benefits from our 
water power, minerals, and other natural resources it is imper- 
ative that we compile a great deal of data on freight rates, labor 
costs, availability of power and a thorough picture of our raw 
materials so we can convince industrialists that Tennessee is 
the logical place for industry to thrive. 1 

It is, therefore, suggested that research be planned to provide ade- 
quate industrial information on (1) material resources, (2) labor 
resources, (3) governmental policies, laws and regulations, (4) in- 
tangible local factors, and (5) existing industries. Let us examine 
some of the more specific research needs under each of these major 


It is essential to inventory carefully the industrial field to dis- 
cover as accurately as possible, within the limits of reasonably ex- 
pected returnable costs, what Tennessee actually has in the way of 

1. The completed research and usable information on re- 
sources should be catalogued and made readily available to the public 
and those interested in the development of these resources. This has 
not been done, and such information as has been gathered is so 
widely scattered in different offices that few persons in the state 
really know what information on resources is actually obtainable. 
Hence, most requests by industrialists for data on resources are 
answered less completely than the available information would per- 
mit if it were all together. Furthermore, only by cataloguing and 

1 State of Tennessee Department of Conservation, The Natural Resources 
of Tennessee (1939), p. 8. 


appraising the industrial data we have is it possible to determine 
what essential information is missing. 

2. A carefully planned research program should be set up to 
obtain the more urgently required industrial information. 

On far too many of the industrial resources in Tennessee, 
such as forests, minerals, water resources, etc., there is available 
little information of the specific kind required by a prospective in- 
dustrialist in making a location decision. Too frequently such 
data as we have boils down to the rather useless fact that such and 
such a material is found in certain counties. It is not known 
whether this means a trace of the material, a small, poor-quality de- 
posit, or a commercially workable one. To provide intelligent an- 
swers for prospective industrialists it is necessary to know (1) the 
quality of the material, (2) the commercial quantities available, (3) 
the permanency of the particular source for plants of various output, 
and (4) some of the processing problems for that particular quality 
of the resource. The lack of this information on many resources 
calls for greatly increased geological, physical, and chemical research. 
In line with this need Dr. Walter F. Pond, State Geologist, recom- 
mends the establishment of: 

A small-scale mineral industrial laboratory to determine the 
grade of Tennessee minerals, their impurities, methods of puri- 
fying and their application to desirable new industries and possible 
new uses. 1 

In some cases, pilot plants should be established and operations 
undertaken to solve processing problems, to provide a basis for cost 
estimates, and to demonstrate the commercial possibilities of certain 
resources. In a few instances such research should result in specific 
prospectuses for particular industries. Three other recommenda- 
tions by Dr. Pond are excellent illustrations of the specific type 
of additional information needed on resource. He recommends: 

1. Periodic collection and analysis of waters from rivers, springs, 
and wells to determine suitability for industrial and munici- 
pal use. 

2. Measurement of flow and gradient of medium and smaller 
streams which would give power to single smaller factories in 
smaller towns and would be suitable for municipal use. 

3. Investigation of ground water supplies for the remainder of the 
State (east half); for increased supplies for farmers, dairies, in- 
dustry, and towns during droughts. 2 

^Tennessee Department of Conservation, The National Resources of 
Tennessee (1939), p. 20. 
2 lbid. 


Detailed information such as that mentioned above as examples 
obtained through a planned research program is essential before we 
can really know what Tennessee has to offer in the way of resources. 

Much excellent work has been completed and is now being 
carried on by several Federal, state and private agencies. Among 
these we find: (1) Federal agencies: Geological Survey, Bureau 
of Mines, Forest Service, Department of Agriculture, and the Ten- 
nessee Valley Authority; (2) state agencies: The Department of 
Conservation, particularly the Division of Geology, and the State 
Planning Commission; and (3) private agencies: railroads, elec- 
tric power companies, and private industrialists. 

Even so, the job is far from complete and progress is slow. 
These agencies are limited by financial resources, scope of author- 
ity, or individual financial interests. The Tennessee Valley Au- 
thority, which has done a valuable job of discovering and analyzing 
resources as far as it has gone, has necessarily limited its work pri- 
marily to the Valley counties. The Tennessee Division of Geology 
is severely limited in its activities by lack of funds. This Division, 
so important in providing accurate information on resources, received, 
roughly, $31,000 a year for all purposes during the two-year period 
ending July, 1941. Private industry must necessarily limit its work 
to the larger deposits. In order to obtain the necessary detailed in- 
formation on resources, the work of these agencies must be inte- 
grated and increased in intensity and scope. 

It may be objected by some persons that the work of discovery 
and analysis of resources and solution of processing problems should 
be left to private industry because private industry reaps the profits 
from this work. If this policy is accepted, industrial development is 
likely to be slow. Small concerns lack technical staffs and financial 
resources to pursue this type of work. Small deposits are, therefore, 
likely to remain undeveloped. The large firms will be concerned 
almost exclusively with the larger quantities of resources. Even in 
the case of larger quantities of resources, it is important to remember 
that to the extent that similar resources are available in competitive 
states, other locational factors being equal, a large concern is more 
likely to give first consideration to resources in those states in which 
more complete information is readily obtainable. 


Much of the industrial development of the South has been 
built upon cheap labor. We need to consider whether Tennessee 
is attracting largely raw material industries and the coarser grades of 


manufacture because of the lack of skilled labor. Is the lack of 
trained personnel a factor limiting the growth of industry in Ten- 
nessee? More information than is now available is needed, for ex- 
ample, on: 

1. The supply of labor available in the unskilled, semi-skilled, 
and skilled classes by particular trades and by geographical 
areas within the state 

2. The need for skilled labor and technicians 

3. The training programs now under way to provide more 
skilled workers 

4. Labor regulation in the state 

5. The effect of national labor regulations on the growth of 
industry in Tennessee 

6. Labor organization and attitudes 

7. The relative efficiency of labor in the state as compared 
with labor in competitive areas. 


It is certainly important to determine as far is possible whether 
state, county, and municipal policies, laws, and regulations promote 
or restrict the growth of industry. 

1 . There should be a careful analysis of the fiscal situation and 
fiscal policies as well as tax laws to discover whether there are restric- 
tions on the growth of industry from these sources. Specifically, are 
taxes comparable with taxes in competitive southern states? Are 
there any taxes which discriminate against industry located in the 
state? Are certain types of taxes likely to hinder industrial develop- 
ment? What is the effect of county and municipal taxes on indus- 
try in those areas? Does industry feel that state, county, and muni- 
cipal tax administrations are fair and sympathetic toward industry? 
Is there a fair corporate code? 

2. State and municipal laws and regulations ought to be ex- 
amined to see whether any of them place industry at a competitive 
disadvantage in the area. Discriminatory taxes on industrial prop- 
erty, burdensome ordinances, and inelastic regulations of various 
kinds restrict industry. 

3. Information should be available on the actual official at- 
titude of various municipalities toward industry as revealed by 
their acts. 


4. The whole problem of subsidies and competitive financial 
inducements needs to be pretty thoroughly studied in the light of the 
experience of many Tennessee towns and counties. 

In many cases, particularly where there are a number of equal- 
cost locations, intangible locational factors are important. Some 
thought should be given to what, if any, practical measures there 
are of increasing the industrial pulling power of intangible factors. 1 

Here a number of , important questions arise on which our in- 
formation, to say the least, is meager. 

1. What are the sources of the chief raw materials and semi- 
finished materials used in Tennessee industry? Could 
feeder industries be developed to supply such materials now 
obtained outside the state? 

2. A more careful study of Tennessee markets might discover 
products consumed but not produced here, but which could 
be produced at competitive costs. 

3. Research may lead to the use of by-products to create new 

4. Research should be planned to aid industry already operat- 
ing in the state by discovering artificial barriers and seek- 
ing their removal. Are there man-made regional state or 
local handicaps? Are there artificial barriers in particular 

5. What is the competitive position of the more important in- 
dustries in Tennessee as compared with the same type of in- 
dustry in other areas? 

6. Efforts ought to be made to uncover the possibilities for 
further processing of manufactured goods now sent else- 
where to be finished. Much of our present industrial 
production is of the coarser variety resulting in semi-finished 

7. Investigations should be directed toward the reasons for 
the decline of certain industries, such as the woodworking 
industry. In some cases the depressing forces responsible for 
the decline of the industry might be removed or reduced, 
and, in other cases, new markets or new products might re- 
place the old ones so that the industry might continue. A 

Tor a discussion of attracting industry through the intangible factors, see 
pp. 87-88. 


careful study of industrial failures in Tennessee might lead 
to the discovery of removable or reducible handicaps. 

8. Are Tennessee industries largely of the low- wage type? Is 
this due at all to lack of skilled labor? 

9. Are there removable bottlenecks limiting the expansion of 
present industries, such as the lack of skilled labor, trans- 
portation facilities, etc.? 


In the light of our information about industries and industrial 
resources in the state, some attempt should be made to outline, 
roughly, an ideal industrial pattern for Tennessee and to formulate 
a clear and honest statement of industrial policies believed best cal- 
culated to produce that desirable industrial pattern. Obviously, 
the conceptual pattern, and with it the industrial policies, must be 
modified as information from the research program increases and 
as thinking about the problem progresses; but, even from the 
start, there must be some common understanding of objectives 
for an industrial development program in the state and some agree- 
ment on policies which will lead to the achievement of these ob- 
jectives. Certainly, as far as the author has been able to discover, 
there is at present among the several agencies in the state which are 
more or less concerned with industrial development, no agreement 
as to the fundamental points to be included in a desirable commer- 
cial and industrial policy for the state. If there is any clearly stated 
policy, no person has indicated any knowledge of it. 

It is not the purpose of the present discussion to attempt to out- 
line industrial development policies for Tennessee. Such policies 
can be formulated only after careful appraisal of available resources 
and existing industries, and only after discussion in which all inter- 
ested groups and individuals have contributed their thinking to the 
final result. Much less ambitiously than the statement of indus- 
trial policies, the purpose here is simply to suggest certain questions 
of policy which should be considered. 

" 1. What should be the state policy on subsidies, financial 
inducement, exemptions, and special privileges? 

2. What should be the policy concerning the attraction of 
industries which do not bear their full share of social 
responsiblities, industries which have little community 
viewpoint, and industries which do not pay their way? 

3. Should the policy be one that favors high grade, stable 
industries and one which discourages weak, unsound, "fly- 
by-night" industries? 


4. What should be the policy concerning the attraction of in- 
dustries located elsewhere as compared with development of 
"new" industries: 1 

5. What should be the policy on the question of absentee 
versus home ownership of industry? 

6. Should state policy be aimed at furthering the diversifica- 
tion of industry in Tennessee or aimed at equal encourage- 
ment in all possible lines? 

7. Is there need for any policy concerning decentralization 
and geographical distribution of industry within the state? 

8. What about the question of the encouragement of indus- 
tries where locational factors are unique as compared with 
industries where locational factors are ubiquitous? 

9. Should there be any policy on the encouragement of in- 
dustry according to whether it uses replaceable or irre- 
placeable resources? 

10. In view of the objectives, is there any need for a policy 
on the encouragement of industry according to the effect 
on the income level of the community? 

These are only a few policy questions. This list is illustrative 
rather than comprehensive. To repeat, the position here is that no 
industrial program can go very far without a clear statement of 
objectives and a clear formulation of policies calculated to achieve 
those objectives. Regardless of the nature of any industrial de- 
velopment program or the kind of organization to execute such a 
program, a critical examination of industrial objectives and poli- 
cies is certainly needed in Tennessee. 

On the basis of the information obtained from a planned re- 
search program and in line with the industrial objectives and poli- 
cies, there should be a step-by-step formulation of an active work- 
ing program for industrial development in Tennessee. Some ele- 
ments of a promotional and selling program are suggested in the 
next two sections. 


Research to obtain the information on Tennessee resources and 
industries is obviously only one part, although an absolutely es- 
sential one, of industrial development for Tennessee. The other 
part is the actual use of this information to obtain more industry. 
Effective use of the facts obtained from research to increase the 
rate of industrial development involves (1) the creation of a cen- 
tral source of information, (2) advertising and publicity campaigns, 
and (3) promotion through direct contact work. 


There should be created in the state a single, centrally located 
agency which would serve as a clearing house of information on 
industry and industrial resources. All requests for information 
on resources, industries, markets, taxes, state and municipal regula- 
tions, etc., by present and prospective industrialists and various 
groups concerned with industrial promotion should be directed to 
this agency, which should be sufficiently staffed to give such re- 
quests prompt attention. 

Under the present set-up, requests by industrialists for infor- 
mation on resources and industries are all too frequently incom- 
pletely answered after considerable delay. Such requests as are 
now received are frequently sent to the Governor's Office, or some 
other state department from which they are transmitted to the De- 
partment of Conservation, the Division of Geology, the State Plan- 
ning Commission, or, in some instances after considerable time, 
to the Tennessee Valley Authority. In a number of instances 
usable detailed information is not available, or only part of the 
information is available, and the agency which finally answers the 
request does not know where the other information may be ob- 
tained or whether it can be obtained at all. 

A central agency should be created to furnish accurate infor- 
mation about resources, industries, etc., to industrialists and other 
interested parties. The information resulting from the research 
program should be available in the central files of this agency as 
far as it is practical to keep it there. If it is not feasible to record 
the information in the central files, then the central agency's file 
should show what other agency in the state does have the informa- 
tion, if it is available. If the information is not available, the cen- 
tral files should show that fact. Requests for industrial informa- 
tion could then be answered promptly and as completely as all in- 
dustrial data available in the state would permit. 

In addition to the unpublished data in its files, the central 
agency on information should keep for distribution four types of 

1. A state book (survey) which would present the key in- 
dustrial facts about the state as a whole 

2. Local industrial surveys of municipalities and regions in the 
state which contain only local data arranged according to 
some unified plan suggested by some central authority un- 
der the state industrial development program 

3. Technical pamphlets which report in detail the research in- 


formation on a given resource such as are now published 
by the Division of Geology on kaolin, coal, etc. 
4. Industrial prospectuses for industries on which the informa- 
tion is complete, enough. The results of researches on types 
of industries suitable for Tennessee should be embodied 
in specific industrial prospectuses, containing complete 
economic and technological analyses of processing problems, 
costs, and relevant information on the locational factors. 

Those in charge of industrial development programs too fre- 
quently spend most of their enthusiasm and energies on comprehen- 
sive surveys which are of little value. The chief dangers are that 
the information will be so general in character that the survey is of 
little help to particular industries and that the large job of compiling 
the detailed data proves too large to handle with available personnel. 
Despite these dangers, in view of the need for both general and 
specific information, there appears definite merit, first, in preparing 
a state publication of some kind containing the more important gen- 
eral industrial information about the state, and, second, local surveys 
which contain more detailed local information not presented in the 
state report. Obviously, the state book should be limited to infor- 
mation which applies to the state as a whole. It is suggested that 
such a book ought to contain: 

(1) A statement of the state's industrial policy 

(2) An abstract of the principal laws, regulations and tax 
measures affecting industry 

(3) Information on quantity, quality, and location of re- 

(4) General information on the size and location of present 
industries and on the amount and rate of industrial 

(5) A list of industries for which various areas of the state 
offer unusual advantages 

(6) A brief statement of the objectives and an outline of the 
industrial development organization together with a list 
of agencies in the state which are in a position to supply 
more detailed information on specific subjects. 

If care is exercised in avoiding duplication in the two types of 
publications, namely, the state book and local industrial surveys, local 
industrial groups can be spared the expense of publishing the state 
information as many times as there are published local surveys. If 
the two publications supplement rather than duplicate each other, 
a request for industrial information first received by a particular 


locality, could be answered by sending both a copy of the general 
state book and a copy of the local industrial survey. Together these 
two should provide the industrialist with all the general information 
he requires. More detailed information about a specific industry 
would, of course, have to come from further correspondence and 

The value of well-timed and carefully placed advertising and 
publicity is too thoroughly established in the business world to ad- 
mit of discussion. Care should be exercised, however, to be sure that 
advertising, publicity, and promotion do not move ahead of, and to 
the exclusion of, accurate information from the basic research pro- 
gram. Certain kinds of advertising and publicity deserve serious 
consideration, for example, such as: 

1. Publicity aimed at making the owners of industries now 
in the state conscious of their advantages in a Tennessee location. 

2. Advertising and publicity in key publications which come 
to the attention of those who make the locational decisions. This 
advertising should be aimed at (1) stating the general advantages 
of the state as an industrial location, (2) creating a favorable at- 
titude on the part of industry towards the state, and (3) keeping 
the state's industrial possibilities before interested persons. This 
need for advertising the industrial opportunities in Tennessee is 
greater now since the private power companies have been dis- 
placed by the Tennessee Valley Authority and small publicly owned 
units because the large private power companies formerly spent 
large sums for industrial advertising which the public owned power 
compaines have not continued. 

3. Educational tours of out-of-state industrialists through the 
state as well as advertising tours through the industrial North and 
East emphasizing Tennessee resources and products. 

4. Planned exhibits at industrial fairs over the United States. 

5. A permanent building for a continuous display of Tennes- 
see resources and industries. Such a display should be located as 
nearly as possible in the direct path of the greatest tourist movement 
in the state. 1 Aside from the tremendous educational value of such 
a display for citizens of Tennessee, a permanent display of Tennes- 
see's resources and industries would have valuable advertising pos- 

1 Approximately 900,000 tourists visited the Great Smoky Mountains 
alone in 1940. 


sibilities. In the author's opinion this idea should be carefully 


1. Some continuing arrangement should be made so that 
the proper agency in Tennessee and interested agencies in local 
areas in the state may be able to learn about, and make contact 
with, industrialists in the North and East who may be considering 
an industrial location in the South. The four large cities now have 
such arrangements. A few of the smaller towns in the state in- 
termittently send a representative to the industrial North and East 
to make contacts and find industrial prospects. Industrial promo- 
tion agents of the railroads frequently give such information to, 
and arrange contacts for, towns within their service area. But 
aside from the four large cities there is little organized effort to con- 
tact and sell prospective industrialists. 

2. A capable industrial engineer should be obtained to help 
in the promotional work. 

3. Arrangement should be made for furnishing advice and 
technical assistance to local groups and small outside industrialists 
in establishing industries based on small quantities of resources. 


A sound and continuing program of industrial development in 
Tennessee must be directed toward developing an enlightened pub- 
lic attitude toward industry, hence the program must include ways 
and means of informing the general public and those concerned 
with local industrial development of the importance of additional in- 
dustry to the state. This is necessary in the first place because the 
financial support, or the approval of such support, for an industrial 
development program must come in one form or another from the 
general public, and in the second place because a large part of the 
work of industrial promotion must be carried on, at least in the final 
stages, by local groups. It is also important that a workable pro- 
gram provide avenues through which invaluable information, ex- 
perience, and opinions of local leaders and successful industrialists 
and business men may be effectively obtained and continuously in- 
tegrated into the growing industrial development program. 

It appears essential, therefore, that a comprehensive industrial 
development program should plan for an adequate flow of informa- 
tion to and from the public. 


1 . Through prepared material for speeches, radio programs, and 
news releases for the general public, civic clubs, women's clubs, etc., 
the public should be informed of industrial policies, technical prob- 
lems and methods of promotion. 

2. Conferences with community leaders should be planned 
to aid in the formulation of industrial policies and to inform them 
of the several phases of the industrial promotion work. 

3. Meetings with small groups of local owners and managers 
of business and industrial enterprises in Tennessee should be held 
for the purpose of discovering what restrictive influences might be 
removed and what new resources and products they think may 
offer industrial opportunities in the area. It is possible that favor- 
able factors for particular industries may be discovered through con- 
ferences with executives of successful industries. 

4. Conferences of bankers and other financial leaders should 
be arranged to create a greater appreciation and understanding of 
the financial needs and problems of small, new enterprises. The 
lack of capital is certainly one factor limiting the development of 
industry in Tennessee. Out of conferences such as the above may 
come some help in the solution of the problem. 

5. There should be scheduled regularly management clinics 
for small industrialists which may lead to greater industry through 
the success of present industrialists. 

6. Annual conferences of a small group of technical persons 
employed in various phases of industrial development in the area 
should be provided for the purpose of discussing basic problems 
and techniques of industrial promotion, essential research, and in- 
dustrial policies. 

7. Some program should be provided for training the work- 
ers and leaders necessary for the success of an industrial develop- 
ment program, and, to the extent that the need exists, some con- 
sideration should be given to the obligation of the several edu- 
cational institutions to incorporate programs for the training of 
the men who will be leaders and workers in the industry of the 
future. Perhaps more technical and vocational schools are needed 
in Tennessee. 

An informational campaign and a series of meetings and con- 
ferences such as outlined above would serve the following purposes: 

1. Create and maintain public understanding of, and en- 
thusiasm for, an industrial development program in the state 


2. Provide for compromise and cooperation between inter- 
ested groups 

3. Maintain channels for obtaining suggestions and opinions 
of local leaders and successful business men 

4. Enable interested persons in different areas of the state to 
reach a common understanding of the basic industrial policies 
adopted by the state and to keep up with the progress of in- 
dustrial development 

5. Provide means of imparting knowledge of methods and 
techniques of industrial promotion. Such work would provide 
for the training of local leadership upon which must rest, in the 
author's opinion, a large part of the responsibility for an effective 
industrial development program. 

The problem is not alone one of getting towns and communi- 
ties interested in industrial development and active in its promo- 
tion. Equally important is the task of developing able local leader- 
ship and creating an understanding of sound policies and principles 
of industrial promotion. In some communities, just to cite one need 
for an understanding of a sound industrial development program, 
over-enthusiastic promotional groups need to be warned against, and 
possibly protected against, serious errors of direct and indirect finan- 
cial over-commitments. It is not uncommon for enthusiastic groups, 
in their efforts to obtain a new plant, to give away in inducements 
more than they get in benefits. The economic and social benefits 
of industrial expansion must be weighed against all of its costs— direct 
costs in the form of subsidies and exemptions, and indirect costs in 
the form of added expenses imposed by necessary increases in 
public services. Any sound program for industrial development 
must provide for intelligent public information aimed at raising 
the level of understanding of local industrial development prob- 
lems, principles and techniques, and at developing and enlisting a 
high quality of local leadership. The program of public informa- 
tion outlined above should greatly facilitate the achievement of 
these ends. 




In the last five chapters of this study evidence has been pre- 
sented to show: (1) that there is a need for increased industrializa- 
tion in Tennessee; (2) that competitive states are formulating and 
placing into operation more effective industrial development pro- 
grams than now exist in Tennessee; (3) that, even though numer- 
ous agencies in Tennessee are concerned with various aspects of the 
problem, there are serious gaps in our present, unintegrated industrial 
development program; and (4) that there are several broad fields and 
a great number of specific ways in which a well-planned industrial 
development program could be effective. 

Three broad courses of action are open. 

1. The negative action of leaving the program of industrial 
development exactly as it is. 

2. A program which would provide for more effective co- 
operation among the several organizations in the state which now 
are, or, could be, interested in industrial development for the 
purpose of determining common objectives, formulating uniform 
policies, and working out and executing step-by-step an integrated, 
long-range program. 

3. The creation of some stable and continuing central organi- 
zation, preferably a division within some state department, which, 
with the co-operation of present agencies, would formulate and 
carry out a program of industrial development. 

The argument is so preponderantly against leaving the pro- 
gram of industrial development as it is that definite action is called 
for in setting up a more effective program. While it is true, as 
shown in Chapter II, that from 1899 to 1939 manufacturing in 
Tennessee increased more rapidly than in all but two southern 
states, and from 1923 to 1939 increased more rapidly than in any 
of the 48 states except Virginia, there are four disturbing facts 
which mar this picture. First, the more rapid growth of manu- 
facturing in Tennessee than in other areas in recent years has been 
due almost entirely to the more or less fortuitous location of five or 
six large plants. Second, Tennessee is still far from being a large 
industrial state. Third, more than 65 of the 95 counties in the 
state are without any appreciable manufacturing. Fourth, much 


of the state's manufacturing is of the coarser grade and consequently 
employs little skilled labor and pays relatively low wages. In the 
next decade lady luck, or, more effective selling on the part of 
competitive states, may place the next large plants in competitive 

In most of the smaller towns and rural counties of Tennes- 
see the organization for industrial development, if any exists at 
all, is generally on paper only and there is little effective effort to 
promote the growth of industry. Little more can be expected from 
the independent action of small towns. In most cases, these towns 
can offer opportunity to but one or two small plants. The economic 
and social benefits to be derived from obtaining one or two such 
plants are too small to justify an active interest in trying to obtain 
such plants or the expense of maintaining an active industrial pro- 
motion agency. In most instances, these towns are too small to bear 
the cost of collecting and analyzing the detailed industrial data neces- 
sary to interest a prospective industrialist. It is also extremely diffi- 
cult for these small towns, acting independently, to learn of desirable 
industrial prospects. If industrial promotion is to be effective in 
speeding up the development of industry in the small towns in Ten- 
nessee these towns must be aided by co-operating agencies, or some 
state agency, which can spread the cost of industrial development over 
a greater number of located plants, undertake the discovery and an- 
alysis of resources, contact industrial prospects, and aid in selling 
such prospects a manufacturing location in Tennessee. 

In addition to this, it is important to remember that competitive 
southern states are stepping up their research, advertising and pro- 
motional programs. This action on the part of other states makes it 
increasingly serious for Tennessee to remain as indifferent as it now 
is toward industrial development during the next decade or so when 
industry is rapidly developing in the South. It is hardly necessary 
to point out that it will be easier for Tennessee to get her share of 
the expanding industry when these new plants are seeking a location 
in the South than it will be after the plants are once located. 

There are at present in Tennessee a number of public and semi- 
public agencies, private groups, and individual business enterprises 
working more or less independently, and in too many cases compet- 
itively, on various problems of commercial and industrial develop- 
ment. Despite the splendid work accomplished to date and the work 
now in progress, on many counts, as pointed out in Chapter V, the 
program for the state as a whole is less effective than it might be. 


For example, location of available industrial information in so many 
different organizations means that requests for industrial information 
are answered less promptly and less completely than would be pos- 
sible under a more unified program. Independent work by the 
several agencies leads all too frequently to duplication of effort, 
to incomplete and partial analysis of many problems of industrial 
development, and, most serious of all, to the complete neglect of 
many other problems which thorough consideration and appreci- 
ation of state-wide interests would most certainly designate as of 
major importance. 

Under the present set-up some industrial growth may be 
expected in Tennessee in the future as in the past, but there is no 
assurance that that growth will be either as rapid as it has been 
in the past or as rapid as the growth of industry in other southern 
states. Likewise there is no assurance that a desirable industrial 
structure will develop. In view of the increased activities of other 
states to develop industry and in view of the limitations and in- 
effectiveness of the present unorganized program, immediate steps 
should be taken to develop an integrated industrial development 
program in Tennessee. Toward this end two plans are suggested 


The first plan proposed for formulating and executing a more ef- 
fective program for industrial development in Tennessee is designed 
to achieve more effective working co-operation between the agencies 
now working on various aspects of the problem. If the state is not 
yet in a position to formulate a definite program and set up a state- 
financed organization, that is, if an industrial development program 
must depend largely upon existing budgets and personnel, then care- 
ful consideration should be given to some method of securing closer 
co-operation between present agencies and thus direct more of their 
work on industrial development toward common objectives. 

Among the public and private agencies and organizations which 
are now concerned with some aspects of industrial development 
in Tennessee and which might co-operate in an integrated, state- 
wide program are the following: 

1. The University of Tennessee 

2. The Tennessee Valley Authority 

3. The Tennessee State Planning Commission 

4. The Tennessee Department of Conservation, including the 
Division of Geology 

5. The chambers of commerce 

6. Local industrial development committees 

7. Tennessee Manufacturers' Association 

8. Tennessee Bankers' Association 

9. The railroads 

10. Private power companies 

11. The newspapers. 

It should be obvious that better results could be obtained if 
the efforts of these various agencies were coordinated. To avoid un- 
necessary duplication of effort and the possibility of working at cross 
purposes, some means should be devised to secure agreement on fun- 
damental policies and to establish common objectives. Some scheme 
of effective co-operation among existing agencies would, first, by care- 
fully fitting together the work that is now being carried on, focus at- 
tention upon the missing parts more urgently needed in an effective 
industrial development program, and second, make it possible to put 
available personnel and facilities in the co-operating agencies to work 
on the more important parts of the problem. Even the considera- 
tion of the various problems of industrial development by able 
workers in the different agencies should improve the quality of the 
work carried on. 

In order to give the industrial development work necessary guid 
ance, stability and continuity under the coordinated plan, two over- 
all integrating committees should be created. First, there should be 
created a state-wide Industrial Development Council, roughly, of 12 
to 15 public spirited citizens consisting of successful business men, 
civic leaders, and administrative representatives of the several agen- 
cies which are to cooperate in the program of industrial develop- 
ment. Second, there should be created a separate small Technical 
Commission of trained persons actually engaged in some aspect of 
industrial research and promotion. On this Commission, one per- 
son should be appointed from each of the co-operating agencies. 
Such a person in addition to being a competent technical worker 
should be thoroughly familiar with the completed work and plans of 
his agency as well as its financial resources and personnel. The In- 
dustrial Development Council should serve primarily in the formula- 
tion of policies, in passing judgment upon the. fundamentals and 
broad outlines of the industrial program, in committing needed 


agencies to co-operation, and in securing public support for the pro- 
gram. The Technical Commission should function largely in (1) 
outlining the type of information required for a sound program, (2) 
surveying the available information, (3) planning additional research 
to obtain the more urgently required missing data, (4) assigning work 
to co-operating agencies on the basis of qualified personnel and 
financial resources, and (5) suggesting appropriate advertising 
and promotional methods. Obviously, the final objectives, policies, 
and program would be the joint work of both the Council and Com- 
mission. This arrangement would provide for continuing critical 
appraisal of research and intelligent reformulation of the industrial 
development program. 

Under this set-up, the actual work of industrial develop- 
ment, that is, research, publicity, and promotion, would continue to 
be done by the present agencies plus such other agencies as could be 
interested in the program and as have facilities or personnel which 
they could spare. Such an integrated and coordinated indus- 
trial development program should, in the long run, achieve much 
better results than are being accomplished under the present set-up. 
It would mean working cooperatively toward common objectives in 
accordance with clearly stated policies. It would mean less dupli- 
cation of effort and as much more attention to the more needed 
missing elements in our present program as the budgets and person- 
nel of the co-operating agencies would permit. Over a period of 
years much more basic information on resources and industries would 
be made available on which to build an intelligent program. The 
mere process of thinking the problem through from different angles 
by members of the two committees would itself be a distinct gain. 

Some coordinating organization such as suggested above may 
be the most logical first step in the development of an integrated, 
state- wide industrial development program in Tennessee. However, 
several serious weak points in this type of set-up, need to be rec- 
ognized. First, there is the very real danger that the Industrial 
Development Council may not be strong enough and active enough 
to give sufficient time and thought to work out and carry through 
a large comprehensive industrial program. Aside from the general 
dangers of any large committee form of organization where interest 
and viewpoints are greatly diverse, such an unpaid Council, whose 
members are busy with their own business and problems, may 
through general inertia, procrastination, and a "let-George-do-it" at- 
titude fail to give sufficient time to think the problem through and to 
formulate and execute a workable program. It is difficult to escape 


the conclusion that the responsible job of formulating and executing 
a state-wide industrial development program should be someone's 
full-time job. 

Second, operating with present budgets and personnel, it would 
be impossible to undertake many desirable elements of an effective 
industrial program, such as those suggested in the preceding chapter. 
There are limits to the amount of work, in addition to their regular 
program, which such agencies as the State Planning Commission, the 
Division of Geology, the Tennessee Valley Authority, The Univer- 
sity of Tennessee, etc., can perform within the limits of their present 
budgets. There are definite limits to which the regular programs of 
these agencies can be redirected to give more time and effort than is 
now being given to the particular work involved in an industrial de- 
velopment program. Individual business enterprises, private agencies, 
and local groups, because of the purposes for which they were 
created and the source of their financial support, must obviously con- 
tinue to devote their main energies to pressing individual and local 
problems. Likewise, several public and semi-public agencies must 
concern themselves chiefly with the particular problems for which 
they were created. Thus, while it is true that by coordinating efforts 
and shifting facilities and personnel as far as possible to work on an 
industrial development program the several agencies could accom- 
plish much more than they are at present accomplishing, it is impor- 
tant to recognize that even with the best of co-operation, some ele- 
ments of an effective program, perhaps very important ones, could 
not be undertaken under this type of set-up. 

Third, such a program would be severely handicapped by lack 
of funds. There is no escape from the fact that an industrial de- 
velopment program costs money. Money will be required for re- 
search, advertising, selling and contact work. Even the effective 
functioning of the Industrial Development Council and Technical 
Commission requires a sizeable expense account. The individuals on 
these two groups could hardly be expected to give their own time 
and energies and then defray their own expenses. It is doubtful 
if the co-operating agencies could spare from their present budgets 
all the money needed for the work of an effective industrial develop- 
ment program. 



In view of the weakness of the above form of organization and 
because of the need for some definite and continuing agency for the 
formulation and execution of a program of industrial development 
for the State of Tennessee, it would appear to be better to set up 
a permanent state agency for this purpose. The most appropriate 
agency would be a Division of Industrial Development, most prob- 
ably in the Department of Conservation. If a new division is not 
possible, an increase in the appropriation and expansion of personnel 
of some existing division in the Department of Conservation for in- 
dustrial development would appear to be the next best thing. 

As an effective organization for promoting industrial develop- 
ment in Tennessee the following general organization is proposed: 


A non-partisan, non-political council consisting of 12 to 15 in- 
dustrial, financial, civic, and educational leaders should be selected 
by the Governor to serve without pay for the purpose of formulating 
broad policies, securing co-operation of necessary agencies, and sell- 
ing the program to the public. 


A commission of 10 to 12 technical men and experts actually 
engaged in different phases of industrial development work in vari- 
ous agencies which agree to co-operate in the state-wide industrial 
development program should be created. This commission would 
provide advice and information on the more technical problems of in- 
dustrial development, such as, (1) outlining the type of data re- 
quired in carrying out a sound development program, (2) securing 
the available industrial data, (3) planning research programs to ob- 
tain the more urgently required missing data, (4) assigning particu- 
lar research and promotional work to the co-operating agencies, and 
(5) suggesting advertising and promotional methods. The repre- 
sentatives of the Technical Commission should come from such 
agencies as The University of Tennessee, the Tennessee Valley Au- 
thority, the Tennessee State Planning Commission, the Tennessee 
Department of Conservation and the Division of Geology, the cham- 
bers of commerce, the Tennessee Bankers' Association, the Tennes- 
see Manufacturers' Association, the power companies, the railroads 
and individual enterprises. 



An Industrial Development Division should be set up, most 
probably in the Department of Conservation, for the purpose of 
promoting industry in Tennessee. An able industrial engineer 
should serve as head of the Division. In order to give direction and 
continuing stability to an integrated program and to insure unity of 
action and avoid duplication, the Division should have complete 
charge of the active program. The Division should look to the 
non-partisan Industrial Development Council for general objectives, 
policies, and judgments on the broad aspects of its program. The 
Division, also, should co-operate closely with the Technical Indus- 
trial Development Commission consisting of technical men from the 
several industrial development agencies in working out the details 
of the program, in effecting co-operation between the agencies, and 
in assigning work to the different agencies in a position to perform it. 

The Division should serve as far as possible as a central file of 
all available industrial information and as a depository of published 
material on industries and resources of the types discussed in Chap- 
ter VII. In line with the suggestion there, the Division should 
answer all requests for industrial information or direct the inquirer 
to the proper agency to answer them. General state advertising, 
publicity, and contact work in attracting industry as well as the pro- 
gram of public education on industry and resources should be han- 
dled by the Division. 

As far as possible, the research work under the industrial de- 
velopment program should be assigned to existing agencies equipped 
to do particular kinds of specialized research. Much of the basic 
research could be carried on at The University of Tennessee. The 
Division of Geology, the State Planning Commission and the Ten- 
nessee Valley Authority are other agencies which could assist in the 
research program. In order to permit existing agencies to carry on 
research, funds should be appropriated for the Industrial Develop 
ment Division with the stipulation that part of the funds could be 
used to finance research on important problems assigned to the co- 
operating agencies. Just as an example, funds might be used from 
time to time to release teaching and research members of The Uni- 
versity of Tennessee staff for special research assignments. Similarly, 
some funds might be used to grant fellowships to graduate students 
at the University to do research on some promising problem in the 
field of industrial development under the direction of some member 
of the University staff. Funds should be provided, not only for ad- 
vertising and the publication of the state book containing essential 


industrial facts, but also for the publication of technical pamphlets 
containing reports on research in particular resources and for the 
publication of industrial prespectuses. 

The work of the Division would necessarily have to be con- 
fined to research, general publicity, and information about the State's 
industries, resources and industrial opportunities, and preliminary 
contact work. Advertising of a specific region within the state and 
most of the job of the actual selling of a prospective industrialist on a 
given location would still have to be done by the interested localities. 
The competitive efforts of different communities to get the same in- 
dustry must be recognized and provided for in any state-wide in- 
dustrial development program. Otherwise there would probably be 
a fight over some plant, which would end effective co-operation on 
the part of the competitive communities and which would probably 
disrupt the whole program. The Division, however, could aid the in- 
dividual communities in their selling job by providing them with 
prospects, with more accurate information on resources, and with a 
better understanding of industrial policies and promotional tech- 

In addition to the help of the Technical Industrial Development 
Commission, it would doubtless prove valuable to have an annual 
meeting, perhaps under the auspices of The University of Tennessee, 
of the technical persons and research specialists from the University, 
the Tennessee Valley Authority, the several divisions and depart- 
ments of the state government, chambers of commerce, power com- 
panies and railroads. An annual meeting of these persons for the 
presentation of papers and round table discussions on important 
technical problems of industrial development in Tennessee should 
insure more careful and thorough consideration of many of the 
problems of industrial development, suggest important problems 
for further work, secure considerable evaluation of industrial policy, 
and serve as an integrating device for the work actually carried on 
by these specialists. 

One other point is worth consideration. Many problems of in- 
dustrial development in Tennessee are South-wide problems. A 
number of factors limiting industrial development apply with more or 
less force to the South as a whole; consequently, South-wide efforts 
should be made to remove or reduce these limiting forces. Because 
of this fact, the Industrial Development Division should make pro- 
visions for establishing working relationships with parallel efforts in 
other southern states. In this way, Tennessee could gain from pool- 
ing its thinking with constructive thinking along parallel lines in 


neighboring states. As a part of this South- wide attack on the 
problem, for example, it would appear advisable to have some defi- 
nite organizational arrangement for co-operation between the Ten- 
nessee industrial development program and the working organization 
created by the Southern Governors' Conference. 


Through some such organization as proposed above, the collec- 
tive thinking of the business men and civic leaders as well as those 
in government, research and educational institutions could be pooled 
in the formulation and execution of a practical program of industrial 
development in line with fundamental objectives. Without some 
such organization, experience has shown that those interested in 
commercial development frequently miss the opportunity of basing 
their actions upon a common understanding of fundamentals. Fur- 
thermore, it is extremely doubtful if any single public or private a- 
gency can think through the complicated and interrelated problems 
involved in a program for industrial development, carry out the re- 
search, and interpret its findings for public guidance. This plan 
would mean much closer and more effective co-operation among the 
several agencies now working on various aspects of the problem in 
Tennessee. By reducing duplication of effort and providing for 
effective utilization of time, it would give better results for the 
same time and money now spent on industrial development. Such 
a program would effect further savings by making use of present 
technical staffs, equipment, and research facilities. Through the 
Industrial Development Council and the Technical Industrial De- 
velopment Commission and through the several channels leading 
up to these two groups and on through them to the Industrial 
Development Division, the development program would profit from 
the accumulated knowledge of industries, resources, industrial prob- 
lems and industrial development experiences and techniques pos- 
sessed by business and civic leaders as well as by experts in the field 
of industrial research and promotion. 

It is difficult to see how either of the plans proposed above for 
the co-operative formulation and execution of a state-wide industrial 
development program could involve any jurisdictional controversy 
between the several agencies or conflicts between local groups. It 
would not displace or duplicate the work of any existing agency, but 
would co-operate with and coordinate the efforts of these agencies. 
Such a plan simply recognizes that the task of securing all the fac- 
tual information necessary for the solution of many of our industrial 


problems and the formulation of a workable commercial and indus- 
trial program is too great to be handled with sufficient speed and 
thoroughness by any one of the existing agencies acting singly with 
present personnel and financial resources. Such apportioning of the 
work among the several agencies, as suggested above, would speed 
up its completion and reduce waste and duplication, and should in- 
crease the quality of the work done by securing analysis of impor- 
tant problems by individuals and organizations particularly qualified 
to handle these specialized problems as well as by providing for the 
careful consideration of these problems from different view points by 
the various groups. Equally important, a carefully planned co-opera- 
tive program would greatly reduce the number of gaps in the in- 
dustrial research program, which is essential to intelligent industrial 
planning and development in Tennessee. 













6> SO. 7 


Industrial development in Tenn main 

3 lEbE 03170 Tb3fc,